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THE WORLD BANK ECONOMIC REVIEW, VOL. 17, NO. 2, 255-281
© 2003 The International Bank for Reconstruction and Development / THE WORLD BANK

Targeting Child Labor in Debt Bondage: Evidence, Theory, and Policy Implications

Arnab K. Basu and Nancy H. Chau

Arnab K. Basu is Assistant Professor, Department of Economics, College of William and Mary; his e-mail address is akbasu{at}wm.edu. Nancy H. Chau is Associate Professor, Department of Applied Economics and Management, Cornell University; her e-mail address is hyc3{at}cornell.edu.

Abstract

Despite recent multilateral efforts to single out child labor in debt bondage as one of the worst forms of child labor, several important questions have yet to be addressed: How pervasive is the phenomenon? Are there systematic correlations between the incidence of children in debt bondage and the economic, legislative, and financial development indicators of the economy? How does an understanding of these correlates affect the way national and international policy measures aimed at targeting this form of child labor are perceived? This article addresses each of these questions. The empirical findings suggest strong correlation between the likelihood of the incidence of child labor in debt bondage with the stage of development of an economy, the stage of financial development, and enforcement of core labor rights. Building on this evidence, the article presents a theoretical model that highlights the drawbacks and merits of a number of policies aimed at putting checks on child labor in debt bondage.


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