Guaranteed Manufactured without Child Labor

Abstract

Does labeling products Child-Labor Free provide a market-based solution to the incidence of child labor? This paper provides a simple model of North-South trade and explores the promise of social labeling in the context of its four oft-noted objectives: child labor employment, consumer information, welfare, and trade linkages. We highlight the market. responses to social labeling when product market competition between the North and South is based on both comparative cost advantage, and the use of child labor as a hidden product attribute. Contrary to what may be expected, we find that upon closer scrutiny, social labeling can imply that: (I) consumers and Southern producers benefit, whereas children and Northern producers are worse off; (II) trade sanctions on unlabeled products deteriorates Southern terms of trade, but leaves the incidence of child labor strictly unaffected; (III) a threat to sanction import of unlabeled Southern products discourages the South from maintaining a credible social labeling program.