Education Subsidy, Trade Liberalization and Foreign Capital Inflow: Impact on Supply of Child Labour and Unemployment of Adult Labour in a Small Open Economy

Abstract

The paper builds up a Harris-Todaro type general equilibrium model to examine the implications of a free education policy and liberalized trade policies on the child labour market. It shows that an increase in the subsidy on education and/or inflow of foreign capital may produce counterproductive effects on the supply of child labour in the urban sector. These policies are likely to produce adverse effects on urban unemployment of adult labour even if two types of labour are not substitutes.