Journal of Economics

, Volume 125, Issue 1, pp 69–95 | Cite as

Low level equilibrium trap, unemployment, efficiency of education system, child labour and human capital formation

  • Kamalika ChakrabortyEmail author
  • Bidisha Chakraborty


This paper builds an overlapping generations household economy model to examine the impact of adult unemployment on the human capital formation of a child and on child labour, as viewed through the lens of the adult’s expectations of future employability. The model indicates that the higher the adult unemployment rate in the skilled sector, the lesser is the time allocated by an unskilled adult towards schooling of her child. We also find that an increase in the unskilled adult’s wage may or may not decrease child labour in the presence of unemployment. The model predicts that an increase in child wage increases schooling and human capital growth rate only if the adults in the unskilled sector earn less than subsistence consumption expenditure. As the responsiveness of skilled wage to human capital increases, schooling and human capital growth rates increase. The model dynamics bring out the importance of education efficiency and parental human capital in human capital formation of the child. In the case of an inefficient education system, generations will be trapped into low level equilibrium. Only in the presence of an efficient education system, steady growth of human capital is possible. Suitable policies that may be framed to escape the child labour trap are discussed as well.


Adult unemployment Skilled and unskilled sector Child labour Human capital Schooling Education Low level equilibrium trap 

JEL Classifications

E24 J21 J22 J24 O15 



We are thankful to anonymous referees for their invaluable comments.


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© Springer-Verlag GmbH Austria, part of Springer Nature 2017

Authors and Affiliations

  1. 1.Jadavpur UniversityKolkataIndia

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