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.

While executive orders in the United States and consumer demand in the European Union expressed vocal concern, these responses were merely reactions and not solutions to child labor. The most common response to child labor throughout high-income countries is to simply legislate against its usage. However, much of Sub-Saharan African agriculture is conducted by peasant farmers and is much harder to regulate; thus, legislation is often ineffective. Additionally, according to [5], the involvement of children in cocoa production is an age-old tradition of imparting cocoa farming skills to the younger generation to take over family farms. The tradition of passing farm skills through the generations adds additional difficulties in legislating against child labor.

Almost one in three children between the ages of five and fourteen are economically active in Africa, compared with fewer than one in five in Asia and one in six in Latin America [6]. According to [7], when child labor occurs in mass (as in the case of the West African cocoa industry), it is likely a symptom of poverty. This is because, when poverty is widespread, parents are compelled to send children to work for survival reasons, reducing the time children spend in school. In addition to being a symptom, child labor is also a contributing factor to poverty, making it increasingly difficult to achieve economic independence, as households rely on child work for support. For households with higher income, education is a necessity, not a luxury good, and adults can internalize the value of child education [8, 9, 10].

In 2001, the Harkin-Engle protocol was signed in the United States, supporting the efforts to end the “worst forms” of child labor in West African cocoa production by providing aid in the amount of ten million dollars [11]. As part of this effort, Tulane University conducted a compressive study in Ghana and Cote d’Ivoire––the two largest cocoa producers globally. The results showed that the number of children aged 5–17 years working in cocoa production, participating in child labor in cocoa production, and doing hazardous work in cocoa production actually grew by 24%, 21%, and 18%, respectively, between the 2008/09 and 2013/14 cocoa growing seasons [12]. In Ghana, there were reductions, albeit small, in the percentage of children working in cocoa production classified as hazardous work [12].

Since the signing of the Harkin-Engle Protocol, the number of children working in hazardous cocoa production across West Africa has increased partially due to the introduction of high-yielding and/or disease-resistant cocoa varieties that require more labor to harvest and process [12]. To meet the Harkin-Engle protocol challenge of a 70% reduction of the worst forms of child labor by 2020, 1.5 million children in both Ghana and Cote d’Ivoire will have to be removed from hazardous work. In June of 2016, the U.S. Department of Labor hosted the Child Labor in Cocoa Coordinating Group (CLCCG) to discuss progress and the challenges of the Harkin-Engel Protocol. During the meeting, Tim McCoy, the President of the World Cocoa Foundation (an NGO that represents governments of cocoa producing regions, cocoa buyers, and cocoa processors), highlighted the need for public-private partnerships to combat and prevent child labor. Further, he emphasized that the cocoa community needed better supply chain-based child labor monitoring and remediation [13]. Thus, it would appear that governments and other public entities cannot eliminate child labor alone in cocoa producing countries and need assistance from private industry. This private assistance could come in the unlikely form of the outright ban on purchasing cocoa from countries that violate child labor laws or the more likely form of labeling and paying premiums for those countries who are mitigating child labor in cocoa production.

As activists, consumers, and politicians continue to be restless about reducing child labor in West African cocoa production, the possibility of labeling “child labor free cocoa” becomes a real possibility [14]. However, without tangible economic incentives, cocoa producers in Ghana and Cote d’Ivoire may not have the time or capacity to respond. This could lead to increased demand from consumers in high-income countries for cocoa from other producing regions globally that have reduced or no child labor issues. This scenario may simply exacerbate the poverty issue in Ghana and Cote d’Ivoire, which in turn could lead to increased, not decreased, levels of child labor in these poverty-stricken regions. However, if an economic incentive like a premium that would pay for cocoa produced in these countries with no child labor existed, then a tangible reduction in child labor may be experienced.

The highest rates of child labor in Africa (> 40%) are found in Mali, Burkina Faso, Niger, Kenya, Uganda, Burundi, and Rwanda—none of which are major cocoa producers [6]. Most of these countries rely on non-cash crops, which are not exported. That is, most of the agriculture in the countries with the highest rates of child labor use this labor for producing food in a subsistence farming framework. In fact, one estimate found that less than 3% of child laborers work in export-oriented agriculture [15]. This raises an interesting question: Do consumers in high-income countries want to end all child labor or only the child labor that is a function of products they consume? Moreover, if consumers in high-income countries demand child-free labor to produce cash crops for exportation like cocoa, would that child labor simply reappear in subsistence farming of other crops such as maize, sorghum, and rice that would be consumed domestically?

Given that legislation of informal farming in Sub-Saharan Africa has proven impractical from an enforcement sense, this paper contributes to the existing literature on child labor in cocoa production by calculating the necessary economic incentive in the form of a fair-trade price premium to entice cocoa producers in Ghana to eliminate hazardous child labor. Given the empirical fact that cocoa production in Ghana is predominantly done by small-scale household farms [16, 17, 18, 19], calculating the price premium to eliminate hazardous child labor calls for a modeling of the household itself. A Farm Household Model (FHM) analyzes factors that influence simultaneous production and consumption (of both cocoa and food staples) decisions of farmers, demand for production inputs (fertilizer, fungicide, capital, and land), and labor/leisure decisions in a theoretically consistent fashion. As such, simulation analysis can be used to illustrate the relative outcomes of policies [20].

The objectives of this study are to (1) formulate and calibrate an FHM for cocoa producers in Ghana who participate in child labor; (2) quantify the effects of eliminating child labor on the equilibrium price, production, and welfare in the cocoa and domestic food markets; and (3) calculate the price premium that would be necessary to make a cocoa-growing household indifferent to the elimination of child labor.

A theoretical model [21] was developed to analyze the possibility of using international transfers to buy-out child labor. The model quantifies the Pareto optimal transfers and shows that the elimination of child labor is possible. They conclude that the transfers needed to eradicate child labor immediately significantly exceed the willingness to pay by consumers in more developed countries. In this study, using Ghana as a case study, an empirical model is used to calculate what the money transfer ($/kg of cocoa) would need to be to eliminate child labor while leaving cocoa farmers indifferent. If the estimated premium is relatively small enough, then activists and consumers could incentivize the reduction of child labor via price premiums paid to producers, instead of relying on political enforcement that has historically been less effective given the informal nature of the cocoa market.

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