IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v53y2020i3p916-948.html
   My bibliography  Save this article

Trade and labour standards: Will there be a race to the bottom?

Author

Listed:
  • Zhiqi Chen
  • Afshan Dar‐Brodeur

Abstract

. We investigate whether strategic competition among developing countries for export market shares will lead to a “race‐to‐the‐bottom” (RTB) in labour standards. We consider an environment that is most conducive to an RTB, specifically in a model of strategic trade in which governments have incentives to lower the costs of their domestic firms. Our analysis shows that strategic trade considerations do not lead to an RTB. To the contrary, equilibrium labour standards involve higher levels of labour compensation than those in the absence of government intervention. Binding global trade rules that restrict export subsidies would move the labour standards closer to their efficient level. Résumé. Commerce et normes du travail: y aura‐t‐il un nivellement par le bas? Dans cet article, nous cherchons à savoir si, pour gagner des parts de marché à l’exportation, la compétition stratégique entre les pays en voie de développement engendrera un nivellement par le bas des normes du travail. À cette fin, nous nous appuyons sur un environnement largement propice à cette théorie, notamment dans un modèle commercial stratégique au sein duquel les gouvernements ont intérêt à baisser les coûts de leurs entreprises domestiques. Notre analyse montre que les considérations en matière de commerce stratégique n’engendrent aucun nivellement par le bas. À l’inverse, des normes du travail à l’équilibre impliquent une rémunération de la main d’œ uvre plus élevée qu’en l’absence de toute intervention gouvernementale. Le fait de contraindre les règles du commerce mondial limitant les subventions à l’exportation rapprochera les normes du travail de leur niveau d’efficacité.

Suggested Citation

  • Zhiqi Chen & Afshan Dar‐Brodeur, 2020. "Trade and labour standards: Will there be a race to the bottom?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 916-948, August.
  • Handle: RePEc:wly:canjec:v:53:y:2020:i:3:p:916-948
    DOI: 10.1111/caje.12450
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/caje.12450
    Download Restriction: no

    File URL: https://libkey.io/10.1111/caje.12450?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nancy H. Chau & Ravi Kanbur, 2006. "The Race to the Bottom, from the Bottom," Economica, London School of Economics and Political Science, vol. 73(290), pages 193-228, May.
    2. repec:fth:michin:387 is not listed on IDEAS
    3. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, and International Economic Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 519-562.
    4. André Sapir, 1995. "The Interaction Between Labour Standards and International Trade Policy," The World Economy, Wiley Blackwell, vol. 18(6), pages 791-803, November.
    5. Stern, R.M., 1996. "Issues of Trade and International Labor Standards in the WTO System," Working Papers 387, Research Seminar in International Economics, University of Michigan.
    6. Kenneth A. Swinnerton, 1997. "An Essay on Economic Efficiency and Core Labour Standards," The World Economy, Wiley Blackwell, vol. 20(1), pages 73-86, January.
    7. Vivek Dehejia & Yiagadeesen Samy, 2004. "Trade and labour standards: theory and new empirical evidence," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(2), pages 179-198.
    8. Tony Fang & Carl Lin, 2015. "Minimum wages and employment in China," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-30, December.
    9. Nidhi Bagaria & Saba Ismail, 2019. "Export Performance of China: A Constant Market Share Analysis," Frontiers of Economics in China, Higher Education Press, vol. 14(1), pages 110-130, March.
    10. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    11. Defever, Fabrice & Riaño, Alejandro, 2017. "Subsidies with export share requirements in China," Journal of Development Economics, Elsevier, vol. 126(C), pages 33-51.
    12. Venables, Anthony J, 1987. "Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model," Economic Journal, Royal Economic Society, vol. 97(387), pages 700-717, September.
    13. Jagdish Bhagwati, 1995. "Trade Liberalisation and ‘Fair Trade’ Demands: Addressing the Environmental and Labour Standards Issues," The World Economy, Wiley Blackwell, vol. 18(6), pages 745-759, November.
    14. Churen Sun & Zhihao Yu & Tao Zhang, 2018. "Agglomeration and Firm Export," Frontiers of Economics in China, Higher Education Press, vol. 13(1), pages 116-132, March.
    15. David Kucera & Ritash Sarna, 2006. "Trade Union Rights, Democracy, and Exports: a Gravity Model Approach," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 859-882, November.
    16. 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 317-328, May.
    17. 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.
    18. Naoto Jinji, 2012. "Factor market monopsony and international duopoly," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(2), pages 271-286, February.
    19. Xavier Cirera & Rajith W. D. Lakshman, 2017. "The impact of export processing zones on employment, wages and labour conditions in developing countries: systematic review," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 9(3), pages 344-360, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Isao Kamatai, 2014. "Regional Trade Agreements with Labor Clauses: Effects on Labor Standards and Trade," Discussion papers e-13-007, Graduate School of Economics Project Center, Kyoto University.
    2. KAMATA Isao, 2014. "Regional Trade Agreements with Labor Clauses: Effects on labor standards and trade," Discussion papers 14012, Research Institute of Economy, Trade and Industry (RIETI).
    3. Eric Neumayer & Indra de Soysa, 2004. "Globalization and the Right to Free Association and Collective," Labor and Demography 0410006, University Library of Munich, Germany, revised 22 Apr 2005.
    4. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    5. Neumayer, Eric & Soysa, Indra de, 2006. "Globalization and the Right to Free Association and Collective Bargaining: An Empirical Analysis," World Development, Elsevier, vol. 34(1), pages 31-49, January.
    6. Vivek H. Dehejia & Yiagadeesen Samy, 2007. "Trade and Labor Standards: A Review of the Theory and New Empirical Evidence," Carleton Economic Papers 07-12, Carleton University, Department of Economics.
    7. Drusilla K. Brown, 2001. "Labor Standards: Where Do They Belong on the International Trade Agenda?," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 89-112, Summer.
    8. Hefeker, Carsten & Wunner, Norbert, 2002. "The producer interest in foreign labor standards," European Journal of Political Economy, Elsevier, vol. 18(3), pages 429-447, September.
    9. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    10. Michaël Bonnal, 2010. "Economic Growth and Labor Standards: Evidence from a Dynamic Panel Data Model," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 20-33, February.
    11. repec:ilo:ilowps:470016 is not listed on IDEAS
    12. Andreas Haufler & Michael Pflüger, 2004. "International Commodity Taxation under Monopolistic Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(3), pages 445-470, August.
    13. Desai, Mihir A. & Hines Jr., James R., 2008. "Market reactions to export subsidies," Journal of International Economics, Elsevier, vol. 74(2), pages 459-474, March.
    14. Bagwell, Kyle & Staiger, Robert W., 2012. "The economics of trade agreements in the linear Cournot delocation model," Journal of International Economics, Elsevier, vol. 88(1), pages 32-46.
    15. Kyle Bagwell & Robert W. Staiger, 2012. "Profit Shifting And Trade Agreements In Imperfectly Competitive Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1067-1104, November.
    16. Laixun Zhao, 2006. "International Labor Standards and Southern Competition," Discussion Paper Series 193, Research Institute for Economics & Business Administration, Kobe University.
    17. Gene M. Grossman & Phillip McCalman & Robert W. Staiger, 2021. "The “New” Economics of Trade Agreements: From Trade Liberalization to Regulatory Convergence?," Econometrica, Econometric Society, vol. 89(1), pages 215-249, January.
    18. Martín Tobal, 2017. "Regulatory Entry Barriers, Rent Shifting and the Home Market Effect," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 76-97, February.
    19. Ralph Ossa, 2011. "A "New Trade" Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122-152.
    20. Inmaculada Martinez-Zarzoso & Hendrik W. Kruse, 2019. "Are Labour Provisions in Free Trade Agreements Improving Labour Conditions?," Open Economies Review, Springer, vol. 30(5), pages 975-1003, November.
    21. Robertson, Raymond, 2020. "Pioneering a New Approach to Improving Working Conditions in Developing Countries: Better Factories Cambodia," IZA Discussion Papers 13095, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • J8 - Labor and Demographic Economics - - Labor Standards
    • F1 - International Economics - - Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:canjec:v:53:y:2020:i:3:p:916-948. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.