Foreign capital, return to education and child labour

The paper attempts to identify the different channels through which economic reforms can affect the incidence of child labour in a developing economy using a three-sector general equilibrium framework with child labour. We show that reduction in poverty is not a necessary condition for the problem of child labour to improve in the developing economies. Economic reforms like an inflow of foreign capital can mitigate the incidence of child labour by raising the return to education and lowering the earning opportunities of children.