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Resolving the Paradox of Social Standards and Export Competitiveness

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Author Info
Stephen B. DeLoach () (Department of Economics, Elon University)
Jayoti Das () (Department of Economics, Elon University)

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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 Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Elon University, Department of Economics in its series Working Papers with number 2008-03.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 25 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:elo:wpaper:2008-03

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Postal: 700 Campus Box Elon College, NC 27244-2010
Web page: http://www.elon.edu/e-web/academics/business/economics/
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Find related papers by JEL classification:
F18 - International Economics - - Trade - - - Trade and Environment
Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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  3. Chisik, Richard, 2003. "Export industry policy and reputational comparative advantage," Journal of International Economics, Elsevier, vol. 59(2), pages 423-451, March. [Downloadable!] (restricted)
  4. Bagwell, Kyle & Staiger, Robert W., 1989. "The role of export subsidies when product quality is unknown," Journal of International Economics, Elsevier, vol. 27(1-2), pages 69-89, August. [Downloadable!] (restricted)
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  5. Cees van Beers, 1998. "Labour Standards and Trade Flows of OECD Countries," The World Economy, Blackwell Publishing, vol. 21(1), pages 57-73, 01. [Downloadable!] (restricted)
  6. Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-69, May. [Downloadable!] (restricted)
  7. Shapiro, Carl, 1986. "Investment, Moral Hazard, and Occupational Licensing," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 843-62, October. [Downloadable!] (restricted)
  8. Richard Chisik, 2002. "Reputational Comparative Advantage and Multinational Enterprise," Economic Inquiry, Oxford University Press, vol. 40(4), pages 582-596, October.
  9. Klaus Conrad, 2005. "Price Competition and Product Differentiation When Consumers Care for the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 1-19, 05. [Downloadable!] (restricted)
  10. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November. [Downloadable!] (restricted)
  11. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August. [Downloadable!] (restricted)
  12. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter. [Downloadable!] (restricted)
  13. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December. [Downloadable!] (restricted)
  14. Jayoti Das & Stephen DeLoach, 2003. "Strategic trade policy in the presence of reputation spillovers," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 12(2), pages 101-116, June. [Downloadable!] (restricted)
  15. Bagwell, Kyle, 1991. "Optimal Export Policy for a New-Product Monopoly," American Economic Review, American Economic Association, vol. 81(5), pages 1156-69, December. [Downloadable!] (restricted)
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