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Globalization's impact on compliance with labor standards

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Author Info

  • Harrison, Ann
  • Scorse, Jason

Abstract

In an effort to shed some light on the larger question of labor standardsvand globalization, we seek to examine compliance with minimum wage legislation in Indonesia. Indonesia is an ideal case study because the govern ment made minimum wages a central component of its labor market policies in the 1990s. During this time, minimum wages quadrupled in nominal terms and doubled in real terms. In this paper we estimate the relationship between international competition and compliance with the statutory minimum wage in Indonesia. We identify firms facing international competition with two plant-level indica tors. First, we use the plant's export orientation as one measure of international competition. Second, we use the plant's foreign ownership as another measure of international competition. Critics claim that foreign firms are exploiting foreign workers, although our research on developing countries has shown that foreign enterprises are more likely to pay higher wages. This framework provides a direct test of the relationship between meas ures of globalization and labor standards, as defined by compliance with the regional minimum wage.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36450.

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Date of creation: 2003
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Handle: RePEc:pra:mprapa:36450

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Related research

Keywords: globalization; minimum wages; foreign investment; corporate social responsibility;

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References

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  1. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1997. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
  2. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2002. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," Working Papers 483, Research Seminar in International Economics, University of Michigan.
  3. Martφn Rama, 2001. "The Consequences of doubling the minimum wage: The case of Indonesia," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 864-881, July.
  4. Eric Edmonds, 2007. "Child Labor," Working Papers id:988, eSocialSciences.
  5. Jeffrey J. Schott, 2000. "WTO after Seattle, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 317.
  6. Strobl, Eric & Walsh, Frank, 2003. "Minimum Wages and Compliance: The Case of Trinidad and Tobago," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 427-50, January.
  7. Aitken, B. & Hanson, G.H. & Harrison, A.E., 1994. "Spillovers, Foreign Investment and Export Behavior," Papers 95-06, Columbia - Graduate School of Business.
  8. Alatas, Vivi & Cameron, Lisa, 2003. "The impact of minimum wages on employment in a low income country : an evaluation using the difference-differences approach," Policy Research Working Paper Series 2985, The World Bank.
  9. Currie, Janet & Harrison, Ann E, 1997. "Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S44-71, July.
  10. Kimberly Ann Elliott & Richard B. Freeman, 2003. "Can Labor Standards Improve under Globalization?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 338.
  11. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
  12. Harrison, Ann E & Scorse, Jason, 2005. "Do foreign-owned firms pay more? : evidence from the Indonesian manufacturing sector 1990-99," ILO Working Papers 378377, International Labour Organization.
  13. Orley Ashenfelter & Robert Smith, 1977. "Compliance with the Minimum Wage Law," Working Papers 478, Princeton University, Department of Economics, Industrial Relations Section..
  14. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S102-35, July.
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Citations

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Cited by:
  1. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
  2. Pranab Bardhan, 2006. "Globalization, Inequality, and Poverty," IDB Publications 9126, Inter-American Development Bank.
  3. Harrison, Ann E. & Scorse, Jason, 2008. "Do foreign-owned firms pay more?," MPRA Paper 15637, University Library of Munich, Germany.
  4. Freeman, Richard B., 2010. "Labor Regulations, Unions, and Social Protection in Developing Countries," Handbook of Development Economics, Elsevier.
  5. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
  6. Harrison, Ann & Scorse, Jason, 2005. "Improving the conditions of workers? Minimum wage legilsation and anit-sweatshop activism," MPRA Paper 36276, University Library of Munich, Germany.
  7. ArnabK. Basu & NancyH. Chau & Ravi Kanbur, 2010. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," Economic Journal, Royal Economic Society, vol. 120(543), pages 244-269, 03.
  8. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
  9. Michaël Bonnal, 2010. "Export Performance, Labor Standards and Institutions: Evidence from a Dynamic Panel Data Model," Journal of Labor Research, Springer, vol. 31(1), pages 53-66, March.

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