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Do Transnational Corporations Care About Labour Standards?

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Author Info
Busse, Matthias

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Abstract

This paper explores the relationship between foreign direct investment, or the activities of transnational corporations, and core labour standards. It discusses the channels through which labour standards may influence foreign direct investment and presents the results of an empirical test of that linkage. The results show that, contrary to the conventional wisdom that transnational corporations engage predominately in countries with low standards, higher labour standards are positively associated with foreign direct investment inflows. Concerns about "social dumping" or "a race to the bottom" on such standards appear to be mistaken. This result even holds for poor developing countries. Die Beziehung zwischen ausländischen Direktinvestitionen, das heißt die Aktivitäten internationaler Konzerne, und grundlegenden Sozialstandards werden in dem vorliegenden Beitrag untersucht. Im Mittelpunkt dabei steht zum einen eine Diskussion möglicher Wirkungskanäle zwischen Sozialstandards und ausländischen Direktinvestitionen; zum anderen eine empirische Überprüfung dieser Zusammenhänge. Die Ergebnisse zeigen, dass internationale Konzerne überwiegend in Ländern investieren, die überdurchschnittlich hohe Sozialstandards aufweisen. Befürchtungen über "soziales Dumping" oder eine wettbewerbsbedingte Verschlechterung der Standards nach unten sind demnach nicht zu erwarten. Dies gilt auch für relativ arme Entwicklungsländer.

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Publisher Info
Paper provided by Hamburg Institute of International Economics in its series Discussion Paper Series with number 26298.

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Date of creation: 2002
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Handle: RePEc:ags:hiiedp:26298

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Related research
Keywords: Transnational Corporations; Foreign Direct Investment; Labour Standards; Cross-Country Regression Framework; International Relations/Trade; Labor and Human Capital; F23; O19;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Kjetil Bjorvatn & Hans Jarle Kind & Hildegunn Kyvik Nordås, 2002. "The Role of FDI in Economic Development," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 28, pages 109-126. [Downloadable!]
  2. George Psacharopoulos & Harry Anthony Patrinos, 1997. "Family size, schooling and child labor in Peru - An empirical analysis," Journal of Population Economics, Springer, vol. 10(4), pages 387-405. [Downloadable!] (restricted)
  3. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Blackwell Publishing, vol. 54(1), pages 89-113.
  4. Drusilla Brown & Alan Deardorff & Robert Stern, 1998. "Trade and Labor Standards," Open Economies Review, Springer, vol. 9(2), pages 171-194, April. [Downloadable!] (restricted)
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  5. Drusilla K. Brown, 2000. "International Trade and Core Labour Standards: A Survey of the Recent Literature," OECD Labour Market and Social Policy Occasional Papers 43, OECD, Directorate for Employment, Labour and Social Affairs. [Downloadable!]
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  6. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2001. "Child Labor: Theory, Evidence, and Policy," Working Papers 474, Research Seminar in International Economics, University of Michigan. [Downloadable!]
    Other versions:
  7. Martin, Will & Maskus, Keith E, 2001. "Core Labor Standards and Competitiveness: Implications for Global Trade Policy," Review of International Economics, Blackwell Publishing, vol. 9(2), pages 317-28, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Schmidt, Oliver, 2005. "Understanding the case of international labour standards – methodological insights into an ongoing debate," MPRA Paper 5558, University Library of Munich, Germany, revised Jun 2006. [Downloadable!]
  2. Eric Neumayer & Indra de Soysa, 2004. "Globalization and the Right to Free Association and Collective," Labor and Demography 0410006, EconWPA, revised 22 Apr 2005. [Downloadable!]
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