The purpose of this paper is to investigate the link between globalization, defined as an increase in trade openness and penetration of foreign direct investment (FDI), and the incidence of child labour while taking into account the role of credit market imperfections. The empirical assessment is based on the panel data comprising of 129 developing countries for four decades from 1970 to 2010. The basic proposition is that trade sanctions may reduce the demand for unskilled workers and minimize their wages; poor families when unable to borrow may have no alternative but to send their children to work. The paper contributes to the existing literature of globalization and child labour not only by exploring the role of credit market imperfections but also by highlighting the changes in exports, incorporating the Jafarey and Lahiri (2002) model of trade sanction and credit market imperfections. It further critically examines Edmonds’s (2009) argument that the channel through which trade could affect child labour is income because the proportion of child labour in the exporting sector is negligible. There already exists an extensive amount of literature on the factors explaining incidence of child labour but it primarily focusses on modelling the demand and supply of child labour and determining its welfare implications. Very few studies have empirically tested the effect of globalization and credit market imperfection on the incidence of child labour. According to Edmonds and Pavcnik (2006), the interaction of trade and child labour has received considerable theoretical attention but empirical evidence on the topic is very scarce. On the theoretical sides Maskus (1997) showed that opening up to trade raises the output of the exportable sector and thus increases the demand for child labour and child wages. Working on two-sector general equilibrium model Chaudhuri and Gupta (2004) pointed out that the effect of trade on incidence of child labour crucially depends on the relative factor intensities within the sectors. Jafarey and Lahiri (2002) presented a two-period two-good model to demonstrate that trade can increase child labour among poor households; a possibility that decreases as their access to credit improves. More recently Dwibedi and Chaudhuri (2010) using three-sector general equilibrium model, demonstrate that an inflow of foreign capital leads to an increase in both adult unskilled wages and skilled wages; and a decrease in child wage rate and a fall in the return to capital. On the empirical sides, Cigno et al. (2002) found out that trade openness[1] is negatively associated with the child labour force participation rate, but not with the primary school non-attendance rate. Edmonds and Pavcnik (2002) found that greater market integration is associated with less child labour. Considering the possible endogeneity in trade, Edmonds and Pavcnik (2006) analyse the effect of trade on child labour. Their result shows that openness is negatively associated with child labour if income is excluded from the regression model, concluding that trade lowered child labour, but via its positive effect on per capita income.