Does child labour increase unemployment and reduce labour force participation? Empirical evidence from Jordan

Abstract

PurposeThe paper aims to investigate the impact of child labour on unemployment and labour force participation. It carries out econometric tests to provide empirical evidence of the strength and direction of such impact. Although this investigation is carried out on Jordanian data during 1993–2018, it can easily be adopted by other developing countries, especially those suffering from a high incidence of child labour. Design/methodology/approachThe paper uses the autoregressive distributed lag (ARDL) bound testing approach to estimate the impact of child labour on unemployment and labour force participation. It also examines the variables of the study by carrying out several diagnostic and pre-estimation tests to justify model selection, including stationary, causality, and cointegrations. Depending on the results of these tests, an econometric model is suggested to estimate the effect of child labour on both unemployment and labour force participation. For testing stationarity of the variables, it applies both individual and group unit root tests. FindingsThe paper provides empirical evidence that child labour causes unemployment but there is little evidence that child labour causes labour force participation. The results of the Johansen cointegration test support that there is one cointegrating link between the variables of the model. Finally, after evaluating 240 models, the paper provides ARDL estimates of the best-fitted relations. Model estimates indicate that, in the long run, child labour helps in increasing the unemployment rate but has little effect on the reduction in the labour force participation rate. In the short run, the impact of child labour on unemployment and labour force participation is insignificant. An increase in child labour will decrease unemployment after three years. Research limitations/implicationsBecause of the chosen research approach, the research results may lack generalizability, as the complexity of child labour is related to a large set of economic and social factors and policy instruments. Practical implicationThe paper includes implications for the development of economic and social policies related to child labour including compacting child labour in developing countries. It also provides a clearer picture of the relationship between child labour and unemployment as well as labour force participation. Originality/valueThis is the first study that addresses the impact of child labour on unemployment and adult labour force participation. However, few studies that discussed the problem of child labour focused on different aspects such as the link between child labour and informal labour force and regulation or child labour and health hazards. More precisely, empirical literature that dealt with the economic impact of child labour failed to produce rigorous evidence regarding this impact. We hope that this study will serve as a starting point to illuminate the discussion on the links between child labour and major economic variables in developing countries.