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

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.