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

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  • 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.

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Bibliographic Info

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

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

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Handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:1-14

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

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Cited by:
  1. Olney, William W., 2013. "A race to the bottom? Employment protection and foreign direct investment," Journal of International Economics, Elsevier, vol. 91(2), pages 191-203.
  2. 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.
  3. Niklas Potrafke, 2013. "Globalization and Labor Market Institutions: International Empirical Evidence," Ifo Working Paper Series Ifo Working Paper No. 154, Ifo Institute for Economic Research at the University of Munich.
  4. 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.
  5. 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.
  6. Mark Setterfield, 2012. "Real Sector Imbalances and the Great Recession," Working Papers 1201, Trinity College, Department of Economics.

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