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Labor Standards and Economic Integration in the European Union: An Empirical Analysis

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Author Info
Vivek Dehejia ()
Yiagadeesen Samy ()

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Abstract

This study is motivated by frequent calls to harmonize labor standards across countries, which result from the fear that economic integration (and the accompanying liberalization of trade flows) will lead to an erosion of working conditions, as countries deliberately try to reduce labor standards in order to maintain competitiveness. We examine the linkages between labor standards and economic integration in the European Union (EU) and, in particular, investigate the following questions. First, whether the conventional wisdom that labor standards are important determinants of trade performance holds, and second whether there has been a “race to the bottom” of standards across countries with deeper integration. We follow a neoclassical factor-proportions framework to conduct our empirical investigation, and unlike previous studies, which rely mostly on cross-sectional data, we use a fully-fledged panel data set to explore the relationship between labor standards and export performance. Our estimates based on data for the period 1980-2001 for EU-15 countries provides mixed evidence regarding the conventional wisdom, and we find that trade performance is largely based on factor endowments. We also find mixed evidence for “ó-convergence” in labor standards.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1746.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1746

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Related research
Keywords: economic integration; labor standards; comparative advantage; ó-convergence;

Find related papers by JEL classification:
J80 - Labor and Demographic Economics - - Labor Standards - - - General

This paper has been announced in the following NEP Reports:

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. Andrea Bassanini & Stefano Scarpetta, 2001. "Does Human Capital Matter for Growth in OECD Countries?: Evidence from Pooled Mean-Group Estimates," OECD Economics Department Working Papers 282, OECD, Economics Department. [Downloadable!]
  2. Alan B. Krueger, 2000. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," NBER Working Papers 7456, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Gabriel Rodríguez & Yiagadeesen Samy, 2003. "Analysing the effects of labour standards on US export performance. A time series approach with structural change," Applied Economics, Taylor and Francis Journals, vol. 35(9), pages 1043-1051, January. [Downloadable!] (restricted)
  4. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June. [Downloadable!] (restricted)
    Other versions:
  5. Dehejia, Vivek H., 1998. "Can standards immiserize?," Economics Letters, Elsevier, vol. 59(3), pages 361-366, June. [Downloadable!] (restricted)
  6. Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, vol. 4(2), pages 139-149, May. [Downloadable!] (restricted)
  7. Vivek Dehejia & Yiagadeesen Samy, 2004. "Trade and labour standards: theory and new empirical evidence," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 13(2), pages 179-198, June. [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. Yiagadeesen Samy & Vivek H. Dehejia, 2008. "Trade and Labor Standards in the European Union: A Gravity Model Approach," Carleton Economic Papers 08-08, Carleton University, Department of Economics. [Downloadable!]
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