Few issues are more controversial in the contemporary globalization debate than the effects of trade liberalization on poverty and well-being in low-income countries. The question of how changes in trade policy affect child labor and schooling is particularly contentious. Yet, the current debate over globalization and child labor is being framed in a setting where empirical evidence is extremely scarce. This research project empirically considers how trade policy affects child labor and schooling in a low-income country using micro-survey data from India. Child labor pervades India with roughly 34 million children 5-14 who work as a principal activity at the start of our data, and the incidence of child labor varies widely across regions. Starting in 1991, India launched a drastic trade liberalization that lowered the average tariff rate from 83% in 1991 to 30% in 1997 and also changed the structure of protection. We explore the causal link between liberalization and changes in child labor and schooling by relating child labor to district and intertemporal variation in tariffs surrounding this reform. India is divided into almost 450 districts and there is vast heterogeneity across districts in terms of industrial composition before liberalization and thus exposure to trade reform. This provides ample variation in schooling, child labor, and trade policy in the data to identify the effects of India's trade liberalization. Methodologically, this study will make two broad contributions. In general, considering the impact of trade policy on poverty related outcomes is plagued by the political economy of changes in trade policy, but the nature of India's reforms allows us to address these concerns. Consequently, this study will provide rare evidence on the effects of changes in trade policy on child labor and schooling. Second, this study illustrates how within country heterogeneity in exposure to an economy-wide trade reform can be used to evaluate the effects of a large scale policy change on child labor and schooling. Finally, by contributing to our understanding of how and why trade policy changes affect child labor and schooling decisions, this research will contribute to the policy debate on child labor and schooling in low income countries.
