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On the Internalization of Cross-National Externalities through Political Markets: The Case of Labour Standards

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Author Info

  • Toke S. Aidt
  • Uk Hwang

Abstract

Can lobbying internalize cross-national externalities? This paper investigates this in a two-country economy where governments regulate labour markets through national labour standards, but are subject to lobbying. We study four different lobbying architectures and show that cross-national externalities are fully internalized in two cases: (i) when governments enter binding international agreements and (ii) when international lobbying is complete. In cases where international lobbying is incomplete, e.g., because of disagreement among lobby groups in different countries or direct bans on lobbying of foreign governments, internalization is also incomplete and a role remains for governments to enter into binding agreements.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 164 (2008)
Issue (Month): 3 (September)
Pages: 509-533

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200809)164:3_509:otioce_2.0.tx_2-p

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Cited by:
  1. Antràs, Pol & Padró i Miquel, Gerard, 2008. "Foreign Influence and Welfare," CEPR Discussion Papers 6884, C.E.P.R. Discussion Papers.
  2. Toke S. Aidt & Facundo Albornoz & Martin Gassebner, 2012. "The Golden Hello and Political Transitions," CESifo Working Paper Series 3957, CESifo Group Munich.
  3. Persson, Lars, 2012. "Environmental policy and lobbying in small open economies," Resource and Energy Economics, Elsevier, vol. 34(1), pages 24-35.
  4. Aidt, Toke S. & Albornoz, Facundo, 2011. "Political regimes and foreign intervention," Journal of Development Economics, Elsevier, vol. 94(2), pages 192-201, March.
  5. Aidt, T.S. & Hwang, U., 2008. "One Cheer for Foreign Lobbying," Cambridge Working Papers in Economics 0860, Faculty of Economics, University of Cambridge.
  6. Toke Aidt & Uk Hwang, 2014. "To Ban or Not to Ban: Foreign Lobbying and Cross National Externalities," Cambridge Working Papers in Economics 1402, Faculty of Economics, University of Cambridge.

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