On labour standards and free trade
AbstractWe investigate the effectiveness and efficiency of alternative measures to increase standards in low-income countries in a two-country framework where (a) trade and standards in low-income countries are negatively related, and (b) free trade is not longer optimal for the high-income country due to a negative psychological externality that low standards in low-income countries exert. We find that any uncoordinated, unilateral action by the high-income country to decrease the psychological externality is dominated by coordinated action; both with respect to the psychological externality as with respect to the welfare consequences for both countries. Coordination is also shown to be feasible and incentive compatible, provided that standards are objectively verifiable. (JEL D62, F13)
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 13 (2004)
Issue (Month): 2 ()
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Web page: http://www.tandfonline.com/RJTE20
Other versions of this item:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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