E child leisure is a luxury good ie adult and child

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Unformatted text preview: relatively scarce – Adult wages are high » Adults can afford to keep children outside the labour force » Adults have a preference for small families Assumptions Assumptions – Adults will send children to work only if adult income is very low; ow; i.e., child leisure is a luxury good i.e., – Adult and child labour are substitutes for each other – Working children are net contributors to the economic benefit of the families Created by: Dr Sumon Bhaumik http://www.sumonbhaumik.net/ Other impact of social environment [2] Model characterisation Model – – – – N families Each family has 1 adult and m children Each Adult consumes c, each child consumes βc, β < 1 Adult each Adult labour supply is inelastic; household chooses child labour e ∈ {0, 1} Household preferences Household – (c + δ, e) > (c, e) (c » Higher consumption is preferred to lower consumption – (c + δ, 1) > (c, 0) if c < s (c – (c + δ, 1) < (c, 0) if c > s (c 1) » Child labour is preferred only if the consumption of the household ld falls below some low threshold falls Created by: Dr Sumon Bhaumik http://www.sumonbhaumik.net/ Other impact of social environment [3] Household budget constraint Household – c + m.β.c = m.e.wc + wa .c m.e.w Children work only if adult consumption falls below a threshold s – If wa > (1 + mβ)s If » c = wa/(1 + mβ) » e = 0 ⇒ Adult labour supply = N; Child labour supply = 0 Adu Child – If wa < (1 + mβ)s If » c = (wa + mwc)/(1 + mβ) » e = 1 ⇒ Adult labour supply = N; Child labour supply = mN Adu Child mN Created by: Dr Sumon Bhaumik http://www.sumonbhaumik.net/ Other impact of social environment [4] Production in Firm i – f(Ai + γCi), γ < 1 ), » Ai ≡ adult labour; Ci ≡ child labour adult » 1/ γ children can do the same amount of work as an adult 1/ Firms are price taking Firms – – – γwa < wc ⇒ adult labour is cheaper ⇒ there is no demand for child labour adult γwa > wc ⇒ child labour is cheaper ...
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This note was uploaded on 10/05/2013 for the course ECON 455 taught by Professor Sumonbhaumik during the Fall '11 term at Simon Fraser.

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