Labor market participation, human capital investments and children: Relationships between household decision making and economic *growth

This dissertation is comprised of three essays. (1) Both time series and cross sectional data show a hump-shaped relationship between fertility (as well as population growth) and per capita income. Existing theoretical literature, however, has explained only the latter portion of the relationship, in which fertility falls as income rises. In the first essay, I propose a simple model which can explain both positive and negative relationships, as well as how an economy moves endogenously from one regime to the other. The model suggests that the key to the hump-shaped relationship between fertility and income lies in the distinctions between the productive and reproductive roles of men and women, and the changes in these roles as the return to human capital increases. (2) The second essay explores the dynamic welfare implications of child labor. In very poor families, child labor may maximize the child's own welfare. When this is true, the labor supply curve is backward-bending and multiple equilibria may exist. In a static model, capital-owners will prefer the child labor equilibrium because the interest rate (the marginal product of capital) is higher with a larger workforce. However, in the dynamic model, it is possible for both labor-owners and capital-owners to prefer an economy without child labor, because an educated adult workforce may be more productive than a workforce comprised of uneducated adults and children. In the dynamic context, therefore, we may find universal support for a policy intervention to coordinate the economy around the equilibrium without child labor. (3) The final essay examines child labor in non-market (home-based) production. Because this form of child labor is relatively inflexible, and the tasks are often reserved for family members, non-market work is different from market work in important ways. This essay develops a model of non-market child labor and compares it to market-based child labor. It demonstrates the potentially perverse impact of parental earnings, the importance of technological advancement, and the different impacts of government transfers, depending on the level of economic development. It also discusses marketization of home production as a key element in the decline of non-market child labor.