Adult and child labor markets with Nashian and Kantian firms

Abstract

PurposeThis paper is a dedication to Professor Ngo Van Long who introduced the idea of Kant–Nash equilibrium. The author extends this analysis to the study of adult and child labor markets.Design/methodology/approachThis is a game theoretic analysis of the market for adult and child workers when some firms behave in the neoclassical Nashian way and some firms follow a Kantian social norm.FindingsThe presence of Kantian firms in the output market in addition to Nashian lowers industry output and labor demand. This raises the possibility that Kantian behavior in the output market could lower wages sufficiently and increase the incidence of child labor. If firms engage in Kantian behavior in the labor market by not hiring child workers, adult wage rises but could lower child wage as children if they work can only work for Nashian firms. When labor demand is sufficiently high, more Kantians could raise adult wage above subsistence and eliminate child labor supply.Originality/valueThis is the first paper to apply Kant–Nash equilibrium to the labor market. The result that Kantian behavior could have an unintended negative spillover effect in other markets is new. The paper keeps alive the ideas of Professor Long, which hopefully will stimulate further work and build on his ideas.