The Interaction of Child-labour and Schooling in Developing Countries: A Theoretical Perspective

This paper analyses the interaction between child labour and schooling in developing countries. A theoretical framework is developed, where fertility and schooling decisions are made in an environment where children contribute through child labour when young and provide old-age security as adults. The model demonstrates that the child wage rate, which is also the opportunity cost of schooling, is a crucial determinant of total fertility. An increase in the child wage rate leads to lower schooling investments and higher fertility levels. However, changes in schooling costs have no impact on fertility decisions. They only affect the allocation of childreni¯s time between schooling and child labour.