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Race-to-the-Bottom or -Top at Home or Abroad: Health and Safety Standards and the Multinational Firm

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  • STEPHEN PAVELIN

    (University of Reading, UK)

  • LYNDA A. PORTER

    (University of Reading, UK)

Abstract

We develop a model to illustrate potential complexities in the relationship between corporate geographical diversification and the health and safety (H&S) standards set in national jurisdictions. A firm, that initially has a plant in its home country, may choose to also have one or two foreign plants in order to improve its bargaining position versus local governments, and so ensure reduced H&S standards, i.e. a race-to-the-bottom. However, contrary to the main focus of the popular debate on this topic, we note the potential for the race-to-the-bottom tendency to be exerted on H&S standards in the multinational company’s home rather than host country, and also for an upward push on H&S to instead result.

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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 42 (2011)
Issue (Month): 3 ()
Pages: 289–311

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Handle: RePEc:eso:journl:v:42:y:2011:i:3:p:289-311

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  1. Bond, E.W. & Samuelson, L., 1988. "Strategic Behavior And The Rules For International Taxation Of Capital," Papers 3-88-10, Pennsylvania State - Department of Economics.
  2. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-21, February.
  3. Leahy, Dermot & Pavelin, Stephen, 2008. "Playing away to win at home," Journal of Economics and Business, Elsevier, vol. 60(5), pages 455-468.
  4. de Meza, David & van der Ploeg, Frederick, 1987. "Production Flexibility as a Motive for Multinationality," Journal of Industrial Economics, Wiley Blackwell, vol. 35(3), pages 343-51, March.
  5. Huizinga, Harry, 1990. "Unions, taxes and the structure of multinational enterprises," Economics Letters, Elsevier, vol. 34(1), pages 73-75, September.
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  7. Sung, Hongmo & Lapan, Harvey E., 2000. "Strategic Foreign Direct Investment and Exchange Rate Uncertainty," Staff General Research Papers 1335, Iowa State University, Department of Economics.
  8. Janeba, Eckhard, 1995. "Corporate income tax competition, double taxation treaties, and foreign direct investment," Journal of Public Economics, Elsevier, vol. 56(2), pages 311-325, February.
  9. Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, vol. 36(8), pages 1557-1571, December.
  10. Dermot Leahy & Stephen Pavelin, 2004. "Divide and Rule: Geographical Diversification and the Multinational Firm," Open Economies Review, Springer, vol. 15(4), pages 363-374, October.
  11. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  12. Eckhard Janeba, 2000. "Tax Competition When Governments Lack Commitment: Excess Capacity as a Countervailing Threat," American Economic Review, American Economic Association, vol. 90(5), pages 1508-1519, December.
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