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The effect of FDI on child labor

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  • Davies, Ronald B.
  • Voy, Annie

Abstract

This paper examines the effect of FDI on child labor. Using 1995 data for 145 countries, we find that, contrary to common fears, FDI is negatively correlated with child labor. This effect disappears when controlling for per capita income. After doing so, we find no robust effect of either FDI or international trade on child labor. This result is robust to corrections for the endogeneity of FDI, trade, and income. Furthermore, this result is confirmed using data from earlier years. This suggests that the impact of FDI and trade on child labor, if any, is the increases in income they generate.

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Bibliographic Info

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

Volume (Year): 88 (2009)
Issue (Month): 1 (January)
Pages: 59-66

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Handle: RePEc:eee:deveco:v:88:y:2009:i:1:p:59-66

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Child labor Foreign direct investment International trade;

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References

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  1. Jeffrey A. Frankel & Andrew K. Rose, 2002. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," NBER Working Papers 9201, National Bureau of Economic Research, Inc.
  2. Eric Neumayer & Indra de Soysa, 2003. "Trade Openness, Foreign Direct Investment and Child Labor," International Trade 0312001, EconWPA, revised 16 Mar 2004.
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  8. Cigno, Alessandro & Rosati, Furio C. & Guarcello, Lorenzo, 2002. "Does Globalisation Increase Child Labour?," IZA Discussion Papers 470, Institute for the Study of Labor (IZA).
  9. Ronald B. Davies, 2002. "Hunting High and Low for Vertical FDI," University of Oregon Economics Department Working Papers 2002-12, University of Oregon Economics Department, revised 01 Aug 2002.
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  12. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series rwp01-013, Harvard University, John F. Kennedy School of Government.
  13. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
  14. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  15. Edmonds, Eric V., 2007. "Child Labor," IZA Discussion Papers 2606, Institute for the Study of Labor (IZA).
  16. 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.
  17. Edward M. Graham, 2000. "Fighting the Wrong Enemy: Antiglobal Activists and Multinational Enterprises," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 91, July.
  18. Edmonds, Eric V & Pavcnik, Nina, 2004. "International Trade and Child Labour: Cross-Country Evidence," CEPR Discussion Papers 4309, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Davies, Ronald B. & Vadlamannati, Krishna Chaitanya, 2013. "A race to the bottom in labor standards? An empirical investigation," Journal of Development Economics, Elsevier, vol. 103(C), pages 1-14.
  2. Donado, Alejandro & Wälde, Klaus, 2010. "How bad is globalization for labour standards in the north?," W.E.P. - Würzburg Economic Papers 84, University of Würzburg, Chair for Monetary Policy and International Economics.
  3. repec:ebl:ecbull:v:30:y:2010:i:1:p:351-364 is not listed on IDEAS
  4. Christian Ebeke, 2011. "The power of Remittances on the Prevalence of Child Labor," Working Papers halshs-00554258, HAL.
  5. Heather Congdon Fors, 2012. "Child Labour: A Review Of Recent Theory And Evidence With Policy Implications," Journal of Economic Surveys, Wiley Blackwell, vol. 26(4), pages 570-593, 09.
  6. Donado, Alejandro & Wälde, Klaus, 2012. "Globalization, trade unions and labour standards in the North," ILO Working Papers 469448, International Labour Organization.
  7. Christian Hubert Ebeke, 2010. "The Effect of Remittances on Child Labor: Cross-Country Evidence," Economics Bulletin, AccessEcon, vol. 30(1), pages 351-364.
  8. Konstantin M. Wacker & Krishna Chaitanya Vadlamannati, 2011. "Do Multinationals Influence Labor Standards? A Close Look at US Outward FDI," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 98, Courant Research Centre PEG.

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