The Trade-Off Between Child Labor and Schooling: Influence of Social Labeling NGOs in Nepal

Does the labeling of products which have been produced without any child laborers contribute to increased welfare of children? This paper presents some results of a survey in Nepal conducted to analyze which factors determine the probability of a child to work, and to examine the influence of non governmental organizations (NGOs) which are engaged in social labeling, on the incidence of child labor and child schooling. Data were obtained from interviews with 410 households of Kathmandu Valley in Nepal. The results of the econometric analysis show that the probability of child labor (i) decreases if the carpet industry has implemented a labeling program, (ii) decreases if the adult’s income increases (‘luxury axiom’), (iii) decreases if the head of the household is educated, (iv) increases with the age of the head of the household, and (v) is increased in the presence of more children (aged 5-14) in the household. It can also be shown that labeling NGOs have a significant positive influence on sending the ex-child laborers to school.