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A Race to the Bottom in Labour Standards? An Empirical Investigation

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  • Ronald B. Davies

    ()
    (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo)

  • Krishna Chaitanya Vadlamannati

    ()
    (University of Heidelberg)

Abstract

Among the many concerns over globalization is that as nations compete for mobile firms, they will relax labour standards as a method of lowering costs and attracting investment. Using spatial estimation on panel data for 148 developing countries over 18 years, we find that the labour standards in one country are positively correlated with the labour standards elsewhere (i.e. a cut in labour standards in other countries reduces labour standards in the country in question). This interdependence is more evident in labour practices (i.e. enforcement) than in labour laws. Further, competition is most fierce in those countries with already low standards.

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Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp385.

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Length: 39 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:iis:dispap:iiisdp385

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Keywords: FLabour Standards; Competition for FDI; Spatial Econometrics;

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Cited by:
  1. Potrafke, Niklas, 2013. "Globalization and labor market institutions: International empirical evidence," Munich Reprints in Economics 19288, University of Munich, Department of Economics.
  2. Johannes Becker & Ronald B. Davies, 2013. "Learning and international policy diffusion: the case of corporate tax policy," Working Papers 1319, Oxford University Centre for Business Taxation.
  3. Krishna Chaitanya Vadlamannati & Arusha Cooray, 2012. "What Drives FDI Policy Liberalization? An Empirical Investigation," CAMA Working Papers 2012-27, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. William W. Olney, 2010. "A Race to the Bottom? Employment Protection and Foreign Direct Investment," Department of Economics Working Papers 2011-02, Department of Economics, Williams College, revised Jan 2012.
  5. Niklas Potrafke, 2013. "Globalisierung und Arbeitsmarktinstitutionen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(04), pages 32-35, 03.
  6. Mark Setterfield, 2012. "Real Sector Imbalances and the Great Recession," Working Papers 1201, Trinity College, Department of Economics.

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