Does Child Labor Decrease When Parental Incomes Rise?

Abstract

When parents and children care about each other’s utility, increases in parental income need not always lead to decreases in child labor. Adults raised in poor families make altruistic transfers to their elderly parents, which the parents take as repayment for income lost when their children were young and spent some time in school instead of work. There is some sufficiently high level of parental income at which children cease to believe that parents need a transfer, whereas parents still would like repayment, so both transfers and the hours of extra education that the transfers made possible cease. Child labor rises.