Child labor and coordination failures

In this note, we show that a technology-based coordination failure may expl ain the emergence of laws restricting child labor. Child labor may arise be cause of the lack of a coordination mechanism between parental decisions to invest in the human capital of their children and firms' decisions to inve st in skill-biased technologies. Legislative intervention in many cases hel ps coordinate expectations towards a Pareto-superior outcome with investmen ts both in human capital and in skill-biased technologies. (C) 2001 Elsevie r Science B.V. All rights reserved.