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Abstract

The model presented here reproduces the empirical fact that poorer countries show a higher incidence of child labor and time-intensive care of retired parents, whereas richer countries have negligible child labor and people indulge in money-intensive care of the old. For that purpose, the effect of social norms of filial obligations on child labor and schooling decisions is analyzed. It is shown that norms of filial obligations are sustainable as an equilibrium in the intergenerational game. Widely discussed contracting problems à la Becker, which allegedly explain underinvestment in schooling by poor households, are thus solved. However, this alone does not induce the elimination of child labor. Technological parameters and relative returns to schooling also play a fundamental role.