Cure for child labor: debts for the kiddies

[Michael Perelman]

This is a hilarious example of how economists frame things-- a market solution
for all ills.  In England, miners were typically slaves in the late 18th C.
The owner would "lend" the slave some money upon the birth of a child, which
would become the child's obligation.  He could be free only after he paid the
"debt."

Michael Pollak cited:


> THE ECONOMIST, September 16-22
>
> ECONOMICS FOCUS
>
>
> Child labour's effects on social welfare are the subject of a recent
> paper* by Jean-Marie Baland of the University of Namur and James A.
> Robinson of the University of California at Berkeley. In a theoretical
> model, the authors show that there can be two reasons for a child to work:
> the imperfection of the capital markets, as outlined above, in translating
> future earning-potential into present spending-power; and the inability of
> parents to make "negative"  bequests to their children. If parents were
> able to bequeath debts to their children, they could, in effect, borrow
> against their offspring's future earnings in order to pay present
> expenses.
>
> Messrs Baland and Robinson acknowledge that negative bequests might be
> hard to implement, for both social and legal reasons. But the day when
> children themselves can borrow against future, education- enhanced,
> earnings may not be too far away. A capital market for such transactions
> could be established by governments or multinational organisations and
> could attract funds from individuals, institutions or governments.
> Children, or more likely parents acting on their behalf, could sign
> contracts promising to repay educational stipends during their working
> lives. Poor countries might also require assurances that signatories would
> use their state-funded skills at home rather than moving abroad. Such
> contracts already bind many state-funded scholars who study abroad.
>
> If the investor is a government, it could recoup its investment by making
> adults surrender a percentage of their wages in return for earlier
> subsidies. But this would merely add to marginal tax rates. It would be
> better to demand lump-sum payments over flexible time-periods. In the
> United States, where loans for university students are packaged and sold
> as securities guaranteed by the government, much post-secondary education
> is already financed in this way. The system might also link subsidies to
> students' performance. In this scenario, children might ease their
> families' economic burdens while happily skipping off to school;  and
> parents might encourage learning to the exclusion of all other activities.
>

--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu