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

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  • Sebastian Braun

Abstract

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.

Suggested Citation

  • Sebastian Braun, 2006. "Core Labour Standards and FDI: Friends or Foes? The Case of Child Labour," SFB 649 Discussion Papers SFB649DP2006-014, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2006-014
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    Citations

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    Cited by:

    1. Elias Dinopoulos & Laixun Zhao, 2007. "Child Labor and Globalization," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 553-579.
    2. Burhan, Nik Ahmad Sufian & Sidek, Abdul Halim & Ibrahim, Saifuzzaman, 2016. "Eradicating the Crime of Child Labour in Africa: The Roles of Income, Schooling, Fertility, and Foreign Direct Investment," MPRA Paper 77250, University Library of Munich, Germany.
    3. Taylor, Mark Zachary, 2007. "National innovation rates: the evidence for/against domestic institutions," MPRA Paper 10997, University Library of Munich, Germany.

    More about this item

    Keywords

    child labour; FDI; core labour standards;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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