'Social Dumping' and Relocation: Is there a Case for Imposing a Social Clause?
AbstractPublic opinion in Europe seems worried about the effect of lower-wage country competition. In both newspaper articles and in policy debates, the term ‘social dumping’ is becoming more and more popular. In many countries, trade unions worried by the effect of what they call ‘unfair competition’, propose the adoption of a ‘social clause’ protecting domestic markets from commodities produced in countries were minimal labour conditions are not met. We analyse the effects of such a policy in the framework of a vertically differentiated Bertrand duopoly. In particular, we study the effects of such a policy on the relocation decisions of the firms and perform a welfare analysis. The welfare analysis takes explicitly into account the unemployment situation in the domestic country by accounting for the workers’ welfare losses due to job reductions following the relocation of firms. We characterize the optimal social clause policy both under domestic welfare maximization and from an efficiency point of view. We show that, on domestic welfare grounds, the case for a social clause policy is weaker the higher the domestic wage and the lower the foreign wage.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1931.
Date of creation: Jul 1998
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Cordella, Tito & Grilo, Isabel, 2001. "Social dumping and relocation: is there a case for imposing a social clause?," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 643-668, November.
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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.:
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Motta, Massimo & Thisse, Jacques-Francois, 1994. "Does environmental dumping lead to delocation?," European Economic Review, Elsevier, vol. 38(3-4), pages 563-576, April.
- Brander, James A. & Spencer, Barbara J., 1987. "Foreign direct investment with unemployment and endogenous taxes and tariffs," Journal of International Economics, Elsevier, vol. 22(3-4), pages 257-279, May.
- Cordella, Tito & Grilo, Isabel, 1998.
"'Globalization' and Relocation in a Vertically Differentiated Industry,"
CEPR Discussion Papers
1863, C.E.P.R. Discussion Papers.
- Isabel Grilo & Tito Cordella, 1998. ""Globalization" and Relocation in a Vertically Differentiated Industry," IMF Working Papers 98/48, International Monetary Fund.
- Willem Molle, 2002. "Globalization, Regionalism and Labour Markets: Should We Recast the Foundations of the EU Regime in Matters of Regional (Rural and Urban) Development?," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 161-172.
- Collie, David R & Vandenbussche, Hylke, 2001.
"Trade, FDI and Unions,"
CEPR Discussion Papers
2772, C.E.P.R. Discussion Papers.
- Jesús F. Lampón & Pablo Cabanelas-Lorenzo & Santiago Lago-Peñas, 2013. "Why firms relocate their production overseas? The answer lies inside: corporate, logistic and technological determinants," Working Papers 2013/3, Institut d'Economia de Barcelona (IEB).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.