Trade Liberalization and Child Labor

Introduction

• Child Labor Issue: A pervasive global problem, especially in developing countries like China.
  • 16% of Chinese children (ages 7-18) involved in labor (Liu, 2016).
• Study Focus: Examines the effect of U.S. granting Permanent Normal Trade Relations (PNTR) to China post-WTO accession (2001) on child labor in China.
• Contribution: Provides evidence linking trade liberalization and child labor in China.

Trade Liberalization Effects

• Economic benefits to developing countries, but its impact on child labor is debated.
  • Positive Effects: May raise household income, reducing child labor.
  • Negative Effects: Creates unskilled employment opportunities, potentially increasing child labor.
• Empirical Inconclusiveness: Variable impacts depending on context (Edwards, 1993; Edmonds, 2008).

Causal Effect of Trade on Child Labor

• Methodology: Quasi-natural experiment using the PNTR change.
  • Difference-in-Differences (DID) Strategy: Compares regions with high vs. low NTR gaps before and after PNTR.
  • Findings: 1% tariff decrease = 1.2% increase in child labor.
• Demographic Impact: Greater effects on girls, older children, rural areas, and families with less-educated parents.

Long-Term Effects

• Weakened Impact Over Time: Due to technological upgrades reducing demand for unskilled labor.
  • Short-term rise in child labor meets demand for unskilled workers.
  • Trade liberalization initially boosts low-skilled industries, affecting child labor more than household income.

Human Capital Investment

• Mixed Impacts:
  • Short-term: Negative on human capital accumulation due to increased opportunity cost of schooling.
  • Long-term: Potential skill upgrading may mitigate negative effects.
  • Prior literature shows varying impacts depending on skill-intensity of exports.

Conceptual Framework

• Child Time Allocation: Schooling, work, and household chores.
• Trade Liberalization Impact: Increases opportunity costs of schooling, pushing children into labor.

Data Source

• China Health and Nutrition Survey (CHNS): Longitudinal data used to analyze child labor trends.

Policy Background: PNTR

• Before 1980: High tariff rates for China as a nonmarket economy.
• Post-2000: PNTR removes uncertainty, stabilizes lower tariff rates, boosting China's exports.

Baseline Specification

• Analyzes trade liberalization's impact on child labor using DID methodology.

Diminishing Effects of PNTR

• Immediate rise in demand for unskilled labor, but gradual technological adaptation reduces reliance on child labor.

Conclusion

• PNTR's Impact: Short-term increase in child labor, with nuanced impacts on human capital and education.
• Implications for Policy: Highlights need for addressing educational gaps exacerbated by trade policies.

References

• Mention of various studies and methodologies assessing the impact of trade policies on child labor and human capital.