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Do transnational corporations care about labour standards?

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  • Busse, Matthias

Abstract

This paper explores the relationship between foreign direct investment, or the activities of transnational corporations, and core labour standards. It discusses the channels through which labour standards may influence foreign direct investment and presents the results of an empirical test of that linkage. The results show that, contrary to the conventional wisdom that transnational corporations engage predominately in countries with low standards, higher labour standards are positively associated with foreign direct investment inflows. Concerns about ?social dumping? or ?a race to the bottom? on such standards appear to be mistaken. This result even holds for poor developing countries. -- Die Beziehung zwischen ausländischen Direktinvestitionen, das heißt die Aktivitäten internationaler Konzerne, und grundlegenden Sozialstandards werden in dem vorliegenden Beitrag untersucht. Im Mittelpunkt dabei steht zum einen eine Diskussion möglicher Wirkungskanäle zwischen Sozialstandards und ausländischen Direktinvestitionen; zum anderen eine empirische Überprüfung dieser Zusammenhänge. Die Ergebnisse zeigen, dass internationale Konzerne überwiegend in Ländern investieren, die überdurchschnittlich hohe Sozialstandards aufweisen. Befürchtungen über ?soziales Dumping? oder eine wettbewerbsbedingte Verschlechterung der Standards nach unten sind demnach nicht zu erwarten. Dies gilt auch für relativ arme Entwicklungsländer.

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Bibliographic Info

Paper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 182.

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Date of creation: 2002
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Handle: RePEc:zbw:hwwadp:26298

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Related research

Keywords: Transnational Corporations; Foreign Direct Investment; Labour Standards; Cross-Country Regression Framework;

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References

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  1. Brown, K.D. & Deardorff, A.V. & Stern, R.M., 1997. "Trade and Labor Standards," Working Papers 394, Research Seminar in International Economics, University of Michigan.
  2. Klein, Michael & Aaron, Carl & Hadjimichael, Bita, 2001. "Foreign direct investment and poverty reduction," Policy Research Working Paper Series 2613, The World Bank.
  3. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-44, September.
  4. Martin, Will & Maskus, Keith E, 2001. "Core Labor Standards and Competitiveness: Implications for Global Trade Policy," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 317-28, May.
  5. George Psacharopoulos & Harry Anthony Patrinos, 1997. "Family size, schooling and child labor in Peru - An empirical analysis," Journal of Population Economics, Springer, vol. 10(4), pages 387-405.
  6. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
  7. Kjetil Bjorvatn & Hans Jarle Kind & Hildegunn Kyvik Nordås, 2002. "The Role of FDI in Economic Development," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 28, pages 109-126.
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Cited by:
  1. Hemmer, Hans-Rimbert & Krüger, Ralf & Seith, Jennifer, 2006. "Ausländische Direktinvestitionen: Flankierende Maßnahmen des Staates," Discussion Papers in Development Economics 36, Justus Liebig University Giessen, Institute for Development Economics.

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