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Resolving the Paradox of Social Standards and Export Competitiveness

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  • Stephen B. DeLoach

    ()
    (Department of Economics, Elon University)

  • Jayoti Das

    ()
    (Department of Economics, Elon University)

Abstract

Over the last decade there has been increasing international pressure on countries to raise social standards (i.e., production standards based on environmental and labor conditions). Currently, the World Trade Organization does not allow countries to impose minimum standards on imports based on environmental or labor standards because it is assumed to undermine competition. There is no consensus in the empirical literature, however, to support this claim. In fact, the evidence suggests that while stronger environmental standards hurt competitiveness, stronger labor standards do the opposite. This paper offers one possible explanation for this paradox. In a simple model of incomplete information, externally-imposed standards may either increase or decrease the competitiveness of infant firms from developing countries depending on the degree of complementarity between the standard and the production of high-quality goods.

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File URL: http://org.elon.edu/econ/WPS/wp2008-03.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Elon University, Department of Economics in its series Working Papers with number 2008-03.

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Length: 25 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:elo:wpaper:2008-03

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  1. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
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  7. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
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  12. Klaus Conrad, 2005. "Price Competition and Product Differentiation When Consumers Care for the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 31(1), pages 1-19, 05.
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  14. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(4), pages 659-79, November.
  15. Jayoti Das & Stephen DeLoach, 2003. "Strategic trade policy in the presence of reputation spillovers," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(2), pages 101-116.
  16. Mari Rege, 2000. "Strategic Policy and Environmental Quality: Helping the Domestic Industry to Provide Credible Information," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 15(3), pages 279-296, March.
  17. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1328-46, December.
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