Research Article: Estimating the economic incentives necessary for eliminating child labor in Ghanaian cocoa production

Date Published: June 7, 2019

Publisher: Public Library of Science

Author(s): Jeff Luckstead, Francis Tsiboe, Lawton L. Nalley, Arega D. Alene.


Concerns about the use of child labor in West African cocoa production became widespread in the early 2000s in many high-income countries. In 2015 in Ghana, 91.8% (or a total of 878,595) of the children working in the cocoa sector were involved in a form of hazardous work. Child labor in cocoa production is not just a symptom of poverty but also a contributing factor, as children often forgo a formal education to work in cocoa orchards. Current Ghanaian law prohibits child labor, but, with many cocoa households living in poverty, child labor becomes a necessity for survival, and as such, current child labor laws are rarely enforced. Therefore, an effective policy that eliminates child labor could compensate farmers by providing an economic incentive. In this paper, we develop and calibrate a farm household model to estimate the cocoa price premium necessary to eliminate child labor from cocoa production while leaving the farm household welfare unchanged. This welfare-neutral price premium removes the negative effects of eliminating child labor for the farm household. Varying degrees of child labor exists, with certain forms posing a greater risk to children’s wellbeing. The results show that eliminating the worst forms of child labor would require a cocoa price premium of 2.81% and eliminating regular work (non-hazardous work but over the maximum hours allowed for a child) and the worst forms would require an 11.81% premium, which could be paid for by the well-established Ghanaian Cocoa Marketing Board. An incentive for the Cocoa Marketing Board to pay the price premium and monitor and enforce this policy would be the ability to differentiate their cocoa as child-labor free and not lose market share to countries who cannot currently certify this practice.

Partial Text

In the early 2000s, concerns about child labor use in cocoa production became widespread in the United Kingdom and other high-income countries following newspaper and documentary allegations of the use of child slaves in West Africa [1, 2, 3, 4]. The allegations, which focused on the discovery of enslaved young men working on Ivorian cocoa farms, later spread concerns about such practices being used in other West African cocoa producing countries. The cocoa industry promptly reassessed its influence over the social responsibility regarding human rights and welfare in the cocoa supply chain. Part of the cocoa industries’ concern, outside of the human rights arena, is that U.S. Executive Order 13126 prohibits federal agencies from purchasing goods made using child labor.

This study develops a farm household model [20] that accurately reflects the production and market conditions of the Ghanaian cocoa industry. While the farm household produces cocoa as a cash crop, they also cultivate food crops (such as cassava, yam, and maize) [36, 37], mainly for subsistence consumption. Since cocoa is a cash crop, all production is surplus and sold at the farm gate price. The farm household uses income from cocoa production and other sources to purchase staple foods that are not met by the household’s own food production as well as non-food items. The household structure treats farmers as both semi-commercial and semi-subsistence with elements of both producer and consumer theory. Consequently, farmers make both production versus consumption and work versus leisure decisions simultaneously.

The model presented in the previous section is calibrated to the Ghanaian cocoa market to simulate the effect of removing child labor in cocoa production. This calibration process utilized data from three micro-level sources: (i) the Ghana Living Standards Survey conducted in 2012/13 [37], (ii) Ghana Cocoa Farmers Survey conducted in 2005/06 [36], and (iii) the Tulane Child Labor Survey in Ghana conducted in 2012/13 [12]. All relevant data are within the manuscript and its supporting information files. As summarized in Table 2, these sources provide data on the following variables: the number of cocoa farming households, the value of production inputs per hectare, the annual household budget structure, time use, and cocoa price. Exchange rate used for monetary conversion is 1.954GHC/1$ retrieved from [38]. All monetary values are in 2012/13 USA dollars ($). In addition, data on annual cocoa production and national food balance sheet are obtained from [39], while the price of non-labor production input was collected from the literature [40] and adjusted by inflation.

The model is numerically solved (using the “multiroot” function in the “rootSolve” package in R) to analyze the impact of reducing or eliminating child labor on cocoa price and production; food production; farm household consumption; allocation of adult’s time to leisure, cocoa production, and food cultivation; and allocation of children’s time to education, leisure, cocoa production, and food cultivation is quantified. For the baseline scenario, the price premium σ is fixed at zero and the child labor restriction L¯e is set exactly equal to the allocation of children’s time to cocoa production in the data, which implies that Eq (11) does not affect the equilibrium solution. The baseline model consists of the system of 17 equations in 17 endogenous variables (see Appendix A in S1 File), which, based on the calibration procedure in the previous section, replicates all the values of the endogenous variables given in the data.

Based on [12], Ghana’s domestic legislation (laws specifying child labor), international agreements (Harkin-Engle Protocol), and consumer support have only led to marginal improvements in the use of hazardous forms of child labor in the cocoa sector. The lack of wide-scale abolishment of child labor in the cocoa-growing regions of Ghana may be because the root cause of child labor is poverty. Cocoa production in Ghana is traditionally small plot farming with most producers living at or below the poverty line. As such, very little motivation exists to reduce child labor, which is an asset, without an economic incentive to do so.




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