Multinational Corporations and Child Labor

Using a sample of forty countries that exhibit a high incidence of child labor, this paper assesses the impact that Multinational Corporations (MNCs) have on the incidence of child labor. Our results show that higher levels of Foreign Direct Investment-our proxy for the presence of MNCs-have a beneficial impact on child labor rates, after controlling for other factors. This we hypothesize is achieved through a direct and an indirect channel. Using these channels MNCs pressure host country-based subcontractors, governments, and labor markets in general. This in turn reduces the incidence of child labor.