Fatima, Ambreen. (2013) Economics of child labour. PhD thesis, University of Nottingham. Access from the University of Nottingham repository: http://eprints.nottingham.ac.uk/12967/1/Final-PhD-Thesis.pdf Copyright and reuse: The Nottingham ePrints service makes this work by researchers of the University of Nottingham available open access under the following conditions. · Copyright and all moral rights to the version of the paper presented here belong to the individual author(s) and/or other copyright owners. · To the extent reasonable and practicable the material made available in Nottingham ePrints has been checked for eligibility before being made available. · Copies of full items can be used for personal research or study, educational, or not- for-profit purposes without prior permission or charge provided that the authors, title and full bibliographic details are credited, a hyperlink and/or URL is given for the original metadata page and the content is not changed in any way. · Quotations or similar reproductions must be sufficiently acknowledged. Please see our full end user licence at: http://eprints.nottingham.ac.uk/end_user_agreement.pdf A note on versions: The version presented here may differ from the published version or from the version of record. If you wish to cite this item you are advised to consult the publisher’s version. Please see the repository url above for details on accessing the published version and note that access may require a subscription. For more information, please contact [email protected] ECONOMICS OF CHILD LABOUR AMBREEN FATIMA Thesis submitted to the University of Nottingham for the degree of Doctor of Philosophy March 2013 Acknowledgement I would like to start by praising Allah Almighty without whose approval nothing is possible. I would like to thank Him for all the mercy He has always bestowed upon me. This dissertation is the result of almost three years of hard work and labour whereby I have been accompanied and supported by many people. It is a pleasant aspect that I now have the opportunity to express my gratitude to all of them. Firstly, I would like to thank both my Supervisors; Dr. Simon Appleton and Dr. Tim Lloyd for their consistent support and guidance that I got throughout the course of the study. Their advices and encouragement helped me to proceed and finish the research work. Their invaluable and timely support has enabled me to meet all the deadlines and produce my dissertation on time. I would like to thank them for monitoring the work and taking effort in reading and providing strict and extensive comments. All the discussions and the interactions which I had with them have made a direct impact in improving the quality of this dissertation. I would also like to express my gratitude to my teacher Akhtar Abdul Hai at Applied Economics Research Centre, University of Karachi, Pakistan for his moral support and encouragement that made the path of pursuing higher studies easy for me. I am also grateful to The Higher Education Commission, Pakistan for funding the study and also University of Karachi for considering me eligible for the scholarship. I am also thankful for the School of Economics, University of Nottingham for giving me an opportunity to carry out my research work in this prestigious institution. The opportunity has helped me a lot in gaining knowledge and skills to finish my research work. I would also like to thank all my friends here in Nottingham for making my stay comfortable and enjoyable especially Nazia, Asma, Fayeza, Sajjida, Kahkashan and Shahwar. Finally, I would like to thank my family, especially my mother who had passed through lots of hardship and difficulty but always encouraged me to finish my studies. I am also thankful to my brother and sisters for their love, prayers and continuous support. ii Abstract The dissertation aims to explore the supply and demand side determinant of child labour at macro, meso and micro level. At macro level it explores the effect of globalization (defined as openness to trade and inflow of foreign direct investment) and credit market imperfections on child labour. At meso level it explores the effect of labour market conditions on child labour. As the above two levels of analysis are mainly concerned with the demand for child labour, the micro level analysis explores the supply side determinant of child labour. At micro level this dissertation explores the effect of intrahousehold distribution of power on child related outcome. Specifically it explores the effect of mother‘s decision making power on her child‘s labour and schooling. The macro level analysis is based on cross country regression framework while meso and micro level analysis is based on the data from Pakistan. At macro level, this dissertation points out that trade openness and FDI inflow raise the standard of living in an economy thereby reducing child labour incidence. As the channel through which trade could affect child labour is by increasing income of the poor, credit market imperfection shows insignificant effect. At meso level, this dissertation points out that high adult wages in an area increase demand for child labour while presence of adult unemployed proportion in an area reduces demand for child labour. However, presence of unemployed adult in a house increases supply of child labour. Exports, on one hand, reduce supply of child labour by affecting the income of poor at macro level while on the other hand at meso level, subcontracting of production process to small informal sector increases demand for child labour. The informal sector being unprotected by law employs a high proportion of child labour. At micro level mother‘s decision making power significantly decreases child labour supply and increases child schooling. The effect is significant in case of girls but not in case of boys. This study also shows that whether children work for generating income or as family helpers, mothers are equally concerned for their welfare. Their decision making power significantly reduces labour among children. iii List of Tables Table2.1: Literature on Pakistan 41 Table 3.1: Regional estimates of children‘s work (5-14) 57 Table 3.2: Average % Child Labour across Region & Time (10-14) 59 Table 3.3: Determinants of Income 73 Table 3.4: Determinants of child Labour 75 Table 3.5: Effect of Male and Female Labour Force Participation Rate 78 Table 3.6: Effect of Income on child Labour 82 Table 3.7: Effect of Trade, Exports and Imports on child Labour 86 Table 3.8: Determinants of child Labour by Gender 88 Table 3.9: Access to Credit and child Labour under DG Model 90 Table 3.10: With Interaction & second order Terms 91 Table 4.1: Non- Agriculture worker in the informal sector 114 Table 4.2: Average Monthly Real Wages 116 Table 4.3: Average Monthly Real Wages by Major Industry 117 Table 4.4: Unemployment Rate 117 Table 4.5: Distribution of Employed population by Hours of Work 118 Table 4.6: Economically active children in Pakistan 133 Table 4.7: Labour Market Conditions and Child Labour (From 1997-98 -2007-08) 137 Table 4.8: Sensitivity Analysis 143 Table 4.9: Labour Market Conditions and Child Labour (From 1990-91 - 1994-95) 145 Table 4.10: Labour Market Conditions and Child Labour by Province 147 Table 4.11: Exploring the Time Variations 149 Table 5.1: The incidence of Child labour by Region 201 Table 5.2: The incidence of Child labour by Gender 201 Table 5.3: The incidence of Child labour by Province 202 Table 5.4: Status of children 202 Table 5.5: Decision Making Indicators and Mother‘s Power 203 Table 5.6: Summary of Indicators used in Mother‘s Decision making Index 204 Table 5.7: Summary Statistics 204 Table 5.8: Correlation Matrix 205 Table 5.9: T-Test 206 Table 5.10: Determinant of Mother‘s Decision Making Power 208 Table 5.11: Probit model of Child Labour 210 Table 5.12: Probit model of Child Schooling 214 Table 5.13: Probit model by Paid and Unpaid Employment 217 Table 5.14: Probit model of child labour and schooling by Gender 219 Table 5.15: Exploring the Non-linearity and Non Monotonicity in MDM by Gender 221 Table 5.16: Probit model for Economically Inactive Children 224 Table 5.17: Effect of Average Scores on Child Labour 226 Table 5.18: Effect Average Scores on Child Schooling 228 Table 5.19: Effect of Individual Component of Mother‘s Decision Making Index 231 Table 5.20: Non-Linearity & Non Monotonicity in MDM 235 Table 6.1: Summary Findings 266 iv List of Figures Figure 1.1: Factors Contributing to Child Labour ................................................................. 7 Figure 3.1: Average % child Labour across Regions & Gender ......................................... 58 Figure 3.2: Average % child Labour Across Decades & Gender ........................................ 58 Figure 3.3: Relationship between Child Labour and Income .............................................. 71 Figure 3.4: Relationship between Child Labour and Trade openness ................................. 71 Figure 3.5: Relationship between FDI and Child Labour .................................................... 72 Figure 3.6: Relationship between Access to Credit and Child Labour ................................ 72 Figure 4.1: Average Monthly Real Wages ........................................................................ 116 Figure 4.2: Unemployment Rate ........................................................................................ 118 Figure 4.3: Economically active children across Time in Pakistan ..................................