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How Bad is Globalization for Labour Standards in the North?

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  • Alejandro DONADO

    ()
    (University of Wurzburg, Department of Economics)

  • Klaus WALDE

    ()
    (University of Mainz, School of Management and Economics, Universite catholique de Louvain and CESifo)

Abstract

We analyse a world consisting of "the North" and "the South" where labour standards in the North are set by trade unions. Standards set by unions tend to increase output and welfare. There are no unions in the South and work standards are suboptimal. Trade between these two countries can imply a reduction in work standards in the North. Moreover, when trade unions are established in the South, the North, including northern unions, tend to lose. Quantitatively, these effects are small and overcompensated by gains in the South. The existing empirical literature tends to support our findings.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2010028.

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Length: 27
Date of creation: 30 Aug 2010
Date of revision:
Handle: RePEc:ctl:louvir:2010028

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Keywords: occupational health and safety; trade unions; international trade; welfare;

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  14. Ronald B. Davies & Annie Voy, 2006. "The Effect of FDI on Child Labor," University of Oregon Economics Department Working Papers 2007-4, University of Oregon Economics Department, revised 01 Feb 2007.
  15. Brown, D.K. & Dearorff, A.V. & Stern, R.M., 1993. "International Labor Standards and Trade: A Theoretical Analysis," Working Papers 333, Research Seminar in International Economics, University of Michigan.
  16. Nirvikar Singh, 2004. "The Impact of International Labor Standards: A Survey of Economic Theory," International Trade 0412007, EconWPA.
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  18. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-43, March.
  19. Eric Neumayer & Indra de Soysa, 2003. "Trade Openness, Foreign Direct Investment and Child Labor," International Trade 0312001, EconWPA, revised 16 Mar 2004.
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