Are Labels Effective Against Child Labor?

New from the Journal of Public Economics:

In this paper, we investigate the impact of introducing a label certifying the absence of child labor in the export production of the South.When most eligible producers in the South can obtain the label, its impact is considerably reduced by a displacement effect whereby adult workers replace children in the export sector while children replace adults in the domestic sector. The label is then unable to create a price differential in the South between goods produced under the label and those produced without it.

When only a small fraction of eligible producers have access to the label, the South exports both labeled and unlabeled goods to the North. In this case, labeled producers generally gain while those without a label generally loose from the introduction of the label. Exante welfare may fall in the South if the probability of getting a label when one qualifies is small. The impact on child labor is in general ambiguous.