Economic yoyos, parasites and child labor

Abstract

PurposeIn the light of a recent systemic model, the yoyo model, this paper aims to look at how to show Bergstrom's Rotten Kid theorem as a simple corollary of earlier results along this line of work, explaining why transferable utility implies Becker's Rotten Kid theorem. It also aims to look at the relevant problem with child labor.Design/methodology/approachThe systemic yoyo model published earlier is the road‐map and foundation for the discussion. Since “as long as the benevolent head continues to contribute his income to all, other members are also motivated to maximize the family income,” as claimed by Becker's Rotten Kid theorem, the issue of child labor naturally comes into play. To this end, an example is constructed to show that the works of Baland and Robinson and Bommier and Dubois need to be fine‐tuned.FindingsThe paper provides a short and clean proof for Bergstrom's Rotten Kid theorem and, by linking to Buchanan's Samaritan's dilemma, the clouds surrounding the difficult situation can be penetrated with more clarity. More specifically, child labor and children's human capital accumulation should not be mutually exclusive, as Baland and Robinson and Bommier and Dubois had assumed.Originality/valueThe paper shows rigorously how Baland and Robinson and Bommier and Dubois need to be fine‐tuned in order to capture more of the published empirical findings.