Abstract
The article embeds child labor in a standard general equilibrium, two‐sector model of a small open economy facing perfectly competitive markets, efficiency wages, and free trade. The modern sector uses skilled adult labor and capital, and the agrarian sector uses unskilled (child and adult) labor and skilled adult labor. Trade policies, foreign direct investment, or both that increase the modern‐sector output reduce the incidence of child labor. Emigration of skilled (unskilled) workers reduces (increases) the incidence of child labor. Child‐wage subsidies increase the incidence of child labor, and a ban on child labor benefits unskilled adult workers but hurts skilled workers.
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