Advanced Search
MyIDEAS: Login

A race to the bottom in labor standards? An empirical investigation

Contents:

Author Info

  • Davies, Ronald B.
  • Vadlamannati, Krishna Chaitanya

Abstract

One of the concerns over globalization is that as nations compete for investment, they relax labor standards to attract firms. Using spatial estimation on panel data for 135 countries over 17years, we find that the labor standards in one country are positively correlated with those elsewhere (i.e. a cut in labor standards in other countries reduces labor standards in the country in question). This interdependence is more evident in labor practices (i.e. enforcement) than in labor laws. Further, while we find evidence of competition in both developed and developing countries, it is strongest among developing countries with weak standards.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0304387813000060
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 103 (2013)
Issue (Month): C ()
Pages: 1-14

as in new window
Handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:1-14

Contact details of provider:
Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Labor standards; Competition for FDI; Spatial econometrics;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Levinson, Arik, 2003. "Environmental Regulatory Competition: A Status Report and Some New Evidence," National Tax Journal, National Tax Association, vol. 56(1), pages 91-106, March.
  2. Busse, Matthias, 2002. "Do Labor Standards Affect Comparative Advantage in Developing Countries?," World Development, Elsevier, vol. 30(11), pages 1921-1932, November.
  3. Ronald B. Davies & Johannes Voget, 2008. "Tax Competition in an Expanding European Union," Working Papers 0830, Oxford University Centre for Business Taxation.
  4. Maarten Allers & J. Elhorst, 2005. "Tax Mimicking and Yardstick Competition Among Local Governments in the Netherlands," International Tax and Public Finance, Springer, vol. 12(4), pages 493-513, August.
  5. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
  6. repec:got:cegedp:93 is not listed on IDEAS
  7. Blonigen, Bruce A. & Davies, Ronald B. & Waddell, Glen R. & Naughton, Helen T., 2007. "FDI in space: Spatial autoregressive relationships in foreign direct investment," European Economic Review, Elsevier, vol. 51(5), pages 1303-1325, July.
  8. Kurt J. Beron & James C. Murdoch & Wim P. M. Vijverberg, 2003. "Why Cooperate? Public Goods, Economic Power, and the Montreal Protocol," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 286-297, May.
  9. Smarzynska Javorcik, Beata & Spatareanu, Mariana, 2005. "Do Foreign Investors Care About Labour Market Regulations?," CEPR Discussion Papers 4839, C.E.P.R. Discussion Papers.
  10. Fredriksson, Per G. & List, John A. & Millimet, Daniel L., 2004. "Chasing the smokestack: strategic policymaking with multiple instruments," Regional Science and Urban Economics, Elsevier, vol. 34(4), pages 387-410, July.
  11. Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 631-53, October.
  12. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "Inequality and Violent Crime," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 1-40, April.
  13. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Strategic Interaction and the Determination of Environmental Policy across U.S. States," Journal of Urban Economics, Elsevier, vol. 51(1), pages 101-122, January.
  14. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
  15. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  16. Bernhard Boockmann & Axel Dreher, 2002. "The Contribution of the IMF and the World Bank to Economic Freedom," International Finance 0207001, EconWPA.
  17. Ekholm, Karolina & Forslid, Rikard & Markusen, James R., 2003. "Export-Platform Foreign Direct Investment," CEPR Discussion Papers 3823, C.E.P.R. Discussion Papers.
  18. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
  19. Richard Baldwin; Paul Krugman, 2001. "Agglomeration, Integration and Tax Harmonization," IHEID Working Papers 01-2001, Economics Section, The Graduate Institute of International Studies.
  20. Frank Kleibergen & Richard Paap, 2003. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Tinbergen Institute Discussion Papers 03-003/4, Tinbergen Institute.
  21. Hansen, Lars Peter & Heaton, John & Yaron, Amir, 1996. "Finite-Sample Properties of Some Alternative GMM Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 262-80, July.
  22. Arestoff, Florence & Granger, Clotilde, 2004. "Does Trade Openess Affect Core Labor Standards ?," Economics Papers from University Paris Dauphine 123456789/6264, Paris Dauphine University.
  23. A. Klemm & S. Van Parys, 2010. "Empirical Evidence on the Effects of Tax Incentives," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/673, Ghent University, Faculty of Economics and Business Administration.
  24. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
  25. Ronald B. Davies & Helen T. Naughton, 2003. "Cooperation in Environmental Policy: A Spatial Approach," University of Oregon Economics Department Working Papers 2006-18, University of Oregon Economics Department, revised 10 Jun 2003.
  26. Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002. "Do Countries Compete over Corporate Tax Rates?," CEPR Discussion Papers 3400, C.E.P.R. Discussion Papers.
  27. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  28. Neumayer, Eric & Soysa, Indra de, 2006. "Globalization and the Right to Free Association and Collective Bargaining: An Empirical Analysis," World Development, Elsevier, vol. 34(1), pages 31-49, January.
  29. Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
  30. Bruce A. Blonigen & Jeremy Piger, 2011. "Determinants of Foreign Direct Investment," NBER Working Papers 16704, National Bureau of Economic Research, Inc.
  31. Busse, Matthias, 2004. "On the determinants of core labour standards: the case of developing countries," Economics Letters, Elsevier, vol. 83(2), pages 211-217, May.
  32. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  33. Drusilla K. Brown, 2001. "Labor Standards: Where Do They Belong on the International Trade Agenda?," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 89-112, Summer.
  34. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  35. Axel Dreher, 2004. "IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality," International Finance 0404004, EconWPA, revised 25 Apr 2004.
  36. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  37. Michael Overesch & Johannes Rincke, 2009. "Competition from Low-wage Countries and the Decline of Corporate Tax Rates: Evidence from European Integration," The World Economy, Wiley Blackwell, vol. 32(9), pages 1348-1364, 09.
  38. Ronald B. Davies & Annie Voy, 2007. "The Effect of FDI on Child Labor," The Institute for International Integration Studies Discussion Paper Series iiisdp215, IIIS.
  39. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Munich Reprints in Economics 20408, University of Munich, Department of Economics.
  40. Murdoch, James C. & Sandler, Todd & Vijverberg, Wim P. M., 2003. "The participation decision versus the level of participation in an environmental treaty: a spatial probit analysis," Journal of Public Economics, Elsevier, vol. 87(2), pages 337-362, February.
  41. Soares, Rodrigo R., 2004. "Development, crime and punishment: accounting for the international differences in crime rates," Journal of Development Economics, Elsevier, vol. 73(1), pages 155-184, February.
  42. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
  43. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
  44. Cho, Seo-Young, 2010. "International human rights treaty to change social patterns: The convention on the elimination of all forms of discrimination against women," Center for European, Governance and Economic Development Research Discussion Papers 93, University of Goettingen, Department of Economics.
  45. SALMON, Pierre, 1987. "Decentralization as an incentive scheme," Institut des Mathématiques Economiques – Document de travail de l’I.M.E. (1974-1993) 98, Institut des Mathématiques Economiques. LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS, Université de Bourgogne.
  46. Gerda Dewit & Holger Görg & Catia Montagna, 2009. "Should I stay or should I go? Foreign direct investment, employment protection and domestic anchorage," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(1), pages 93-110, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. William W. Olney, 2010. "A Race to the Bottom? Employment Protection and Foreign Direct Investment," Center for Development Economics 2011-02, Department of Economics, Williams College, revised May 2011.
  2. Potrafke, Niklas, 2013. "Globalization and labor market institutions: International empirical evidence," Munich Reprints in Economics 19288, University of Munich, Department of Economics.
  3. Krishna Chaitanya Vadlamannati & Arusha Cooray, 2012. "What Drives FDI Policy Liberalization? An Empirical Investigation," CAMA Working Papers 2012-27, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Johannes Becker & Ronald B. Davies, 2013. "Learning and international policy diffusion: the case of corporate tax policy," Working Papers 1319, Oxford University Centre for Business Taxation.
  5. Niklas Potrafke, 2013. "Globalisierung und Arbeitsmarktinstitutionen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(04), pages 32-35, 03.
  6. Mark Setterfield, 2012. "Real Sector Imbalances and the Great Recession," Working Papers 1201, Trinity College, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:1-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.