ABSTRACT
The new development strategy with liberalized trade and investment policies, adopted by the developing countries over the last two decades or so, has not so far been an unmixed blessing. In their endeavour to implement such policies, these economies have been facing some adjustment costs, of which increasing skilled-unskilled wage inequality, persistence of poverty and incidence of child labour are worth mentioning. Advocates of economic liberalization with standard trade theoretic models in mind expected the wage inequality to improve in the developing economies. They also believed that economic reforms would take the developing countries into higher growth orbits, the benefits of which would certainly percolate down to the bottom of the society, thereby leading to the reduction of poverty and poverty-driven child labour incidence. However, empirical studies reveal that wage inequality and poverty have increased in many liberalizing economies.1 Although the problem of child labour has decreased in general, the decline has not been uniform in all regions. ILO (2006) has reported that the number of economically active children in the 5-14 age group declined by 11 per cent in 2004 from the 2000 figure. The decline is the sharpest for Latin America and Caribbean, whereas Asia and Pacific and Sub-Saharan Africa registered very small declines in activity rates.2
