In this report, I explain my dissertation on the incidence of child labor. Through the creation of a theoretical model, I explore the relationship between dynamics of wage inequality and child labor. The aim of my work is to find a proper policy recommendation to solve (at least partially) both problems. Moreover, I briefly discuss the context of my memoir in a bit more detailed fashion.
In order to be able to begin my research I had to choose a field of study. Labour economics was my chosen field given that I am strongly concerned about the effects of income inequality and the existence of child labour. Additionally, I believe that they are two of the biggest current challenges that the world is facing. By knowing which field to study and which aspects to cover, I started to review the literature on the topic.
After exploring the existing literature, I decided to combine models on child labor with models on inequality with the aim of finding an adequate policy recommendation to simultaneously reduce child labor and wage inequality. Then I constructed a rough model to be sure that the main question is actually applicable, and constructed the final version of my research question afterwards. Finally, I developed an Overlapping Generations framework in which the response of household behavior to income shocks can be traceable through periods.
In the model, there are two groups in a given population divided by income levels in a small open economy. I impose the assumption that households prefer sending their children to school only if adult income is sufficient to support the family. If children go to school instead of working, they will obtain high wages as a result of human capital accumulated via schooling. As a result, when the previously schooled children become adults they will be able to feed their own children and, in some cases even have some surplus left. The policy suggestion of the paper can roughly be explained as follows: A redistributive policy in which government taxes, at least a part of the excess wage income of high wage households and, channels that to a randomly assigned small fraction of the poor households. The received income flows make that proportion of the poor households’ wealth, if it is sufficient households will send their children to school, leading to a decrease of child labor. As a consequence, the proportion of skilled human capital of the population will increase (therefore, high wage earner population). By increasing the level of human capital in society and assuming that population is fixed, the supply of low wage labor force will decrease. The result will be an increase in the wage from the low human capital individuals and, a reduction in the gap between high wage and low wage levels.
The theoretical model was my contribution current literature as well as the review of previous literature. To conclude, I can suggest writing a dissertation to those who are interested in pursuing an academic career and in the development of either theoretical or empirical models. In other cases, it can be that the marginal benefit from an internship is higher.