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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://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2006-014.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-014.

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Length: 31 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2006-014
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  11. Basu, Kaushik & Tzannatos, Zafiris, 2003. "The Global Child Labor Problem: What Do We Know and What Can We Do?," Working Papers 03-06, Cornell University, Center for Analytic Economics.
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  14. Kaushik Basu, 1999. "Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1083-1119, September.
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  16. Emerson, Patrick M. & Portela Souza, André, 2007. "Is Child Labor Harmful? The Impact of Working Earlier in Life on Adult Earnings," IZA Discussion Papers 3027, Institute for the Study of Labor (IZA).
  17. 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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