Consider the household model of Section 14.1.2. Suppose that each household has A = 40 hours of adult time and C = 60 hours of children's time to allocate between labor and leisure. The price of manufactures is always equal to 1. Suppose that the household head's utility function is given by (14.1), with G = 24.
(a) Suppose that the price of rice is equal to 1. How much total labor is done by the household? How much child labor? Illustrate using a diagram with the household's budget line and indifference curve at the optimum.
(b) Now, suppose that the price of rice has gone up to 1.5, because rice is an export good and the cost of shipping the rice abroad has fallen. Repeat the analysis part (a).
(c) Now, repeat for a household that makes manufactures.
(d) In this model, what effect does globalization have on child labor? Explain. (If you can interpret in terms of income and substitution effects, all the better.)