Endogenous Altruism, Learning by Doing Effect and Impact of Domestic Policies on Child Labour

This paper builds an overlapping generations household economy model where child labour is present. We argue that the degree of parental altruism is determined by the level of schooling of the parent. A more educated parent has more willingness to invest in human capital formation of child. These differences in preferences of parent towards offspring’s schooling bear significant effects on the long run dynamics of schooling. In this context, we study the efficacy of child labour ban vis-a-vis education subsidy in enhancing schooling and reducing child labour. In an extension of the basic model, we also study the dynamics of schooling in the presence of learning by doing effect in unskilled work.