Does the labeling of products which have been produced without any child laborers
contribute to increased welfare of children? This paper presents some results of a survey in
Nepal conducted to analyze which factors determine the probability of a child to work, and to
examine the influence of non governmental organizations (NGOs) which are engaged in social
labeling, on the incidence of child labor and child schooling. Data were obtained from interviews
with 410 households of Kathmandu Valley in Nepal. The results of the econometric analysis
show that the probability of child labor (i) decreases if the carpet industry has implemented a
labeling program, (ii) decreases if the adult’s income increases (‘luxury axiom’), (iii) decreases if
the head of the household is educated, (iv) increases with the age of the head of the household,
and (v) is increased in the presence of more children (aged 5-14) in the household. It can also be
shown that labeling NGOs have a significant positive influence on sending the ex-child laborers
to school.