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

  • Sebastian Braun

    ()

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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File URL: http://hdl.handle.net/10.1007/s10290-006-0092-6
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Article provided by Springer & Institut für Weltwirtschaft (Kiel Institute for the World Economy) in its journal Review of World Economics.

Volume (Year): 142 (2006)
Issue (Month): 4 (December)
Pages: 765-791

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Handle: RePEc:spr:weltar:v:142:y:2006:i:4:p:765-791
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  1. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
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  14. Mahmood Hussain & Keith E. Maskus, 2003. "Child Labour Use and Economic Growth: An Econometric Analysis," The World Economy, Wiley Blackwell, vol. 26(7), pages 993-1017, 07.
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  17. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
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