Free Education Policy and Trade Liberalization

Consequences on Child and Adult Labour Markets in a Small Open Economy

The paper purports to examine the implications of a free education policy and trade liberalization on the child and adult labour markets in the set-up of a Harris-Todaro type general equilibrium model. It has been found that a hike in the education subsidy or an inflow of foreign capital may produce counterproductive results on the supply of child labour in the urban area. Moreover, these policies may raise the level of urban unemployment of adult labour even when two types of labour are not substitutes to each other. The average income of the urban poor families may also decrease as a consequence.