To the extent that globalization does translate into significant job creation in developing countries, the potential impact on poverty can be dramatic. But this impact depends significantly on where the job creation occurs. In China much of the impetus for the rapid economic growth during the 1980s came from a tremendous expansion of rural township and village enterprise activities. These frins often emerged out of the community level structures which had been in place prior to the introduction of the household responsibility system in agriculture in the late 1 970s, and typically became involved in labor-intensive export oriented manufacturing activities (Byrd and Lin, eds., 1990). The inroads into rural poverty which were achieved in China during this period were nothing short of remarkable (World Bank, 2000b). In other parts of the developing world a similarly strong negative relationship between poverty and the non-farm sector has been observed. Even where non-farim employment opportunities accrue primarily to the relatively educated and skilled (and thus non-poor), benefits to the poor are often still discernable. This is due to the relationship between the wage rates earned by agricultural laborers in rural areas, who are generally highly represented among the poor, and the tightening of rural labor markets which generally accompanies an expanding non-farm sector (Lanjouw and Lanjouw, 2000).

On the other hand, there is a legitimate concern that participation in world markets may be associated with an increase in child labor. The latter could have a detrimental effect on child welfare, both in the short term and in the longer term, though reduced schooling. Policy reforms that promote labor-intensive production could therefore be a mixed blessing for the poor. For example, a recent study of child labor in a city in western India concluded that: "The prevalence and absolute expansion of child labor in a period and region of relatively high growth of aggregate output indicates that the nature of economic growth is flawed" (Swaminathan, 1998, page 1526). The argument merits closer scrutiny. An important issue is whether sectors exposed to international competition tend to be more intensive in child labor. Unfortunately, the evidence in this respect is scattered.

According to statistics assembled by the International Labour Office, about 70 percent of the children who work are employed as unpaid family helpers in rural areas (Ashagrie, 1997). Around 5 percent of all child workers could actually be employed in export industries. A well-known example is the carpet industry in Uttar Pradesh. An International Labour Office survey of carpet-weaving enterprises found that a quarter of the workers were less than 14 years old. Children and adults perform the same job in these enterprises, with roughly the same productivity. But children workers have lower wages. Given how competitive the industry is, some argue that small loom owners would not be able to absorb the decrease in profits, were child labor banned. Garment manufacturing in Bangladesh was another notorious example. However, enterprises stopped employing children under 14 years of age due to a consumer boycott in industrial countries. It is through the sex industry that globalization could have its most adverse impact on the children of developing countries. Lower travel costs and better information networks may be associated with a growth in sexual tourism, including pedophilia. The children affected may only represent a tiny fraction of all the children who work. But the implications for their well-being are dramatic enough to warrant swift public action.

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