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Core Labour Standards and FDI: Friends or Foes? The Case of Child Labour

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  • Sebastian Braun

Abstract

We test the often-cited hypothesis that high levels of child labour attract foreign investors. Using panel data we show the overall effect, which child labour has on foreign direct investment (FDI), to be a (small) negative one. We find strong evidence for the theoretical prediction that child labour deters FDI by slowing down economic development. Weaker evidence is provided for our theoretical prediction that child labour can discourage FDI via its impact on the availability of a skilled labour force in an economy. The data do not indicate that high levels of child labour drive down the factor share of labour, thereby increasing the attractiveness of an economy for foreign investors.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-014.

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Length: 31 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2006-014

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Keywords: child labour; FDI; core labour standards;

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References

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  1. Kai Carstensen & Farid Toubal, 2003. "Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis," Kiel Working Papers 1143, Kiel Institute for the World Economy.
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  3. Kaushik Basu, 1999. "Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1083-1119, September.
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  13. Kaushik Basu & Zafiris Tzannatos, 2003. "The Global Child Labor Problem: What Do We Know and What Can We Do?," World Bank Economic Review, World Bank Group, vol. 17(2), pages 147-173, December.
  14. John F. Helliwell, 1994. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc.
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  18. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
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Cited by:
  1. Taylor, Mark Zachary, 2007. "National innovation rates: the evidence for/against domestic institutions," MPRA Paper 10997, University Library of Munich, Germany.

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