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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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  1. Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
  2. Carstensen, Kai & Toubal, Farid, 2004. "Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 3-22, March.
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  4. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
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  7. Dani Rodrik, 1999. "Democracies Pay Higher Wages," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 707-738, August.
  8. Patrick M. Emerson & Andr� Portela Souza, 2011. "Is Child Labor Harmful? The Impact of Working Earlier in Life on Adult Earnings," Economic Development and Cultural Change, University of Chicago Press, vol. 59(2), pages 345 - 385.
  9. Philipp Harms & Heinrich Ursprung, 2001. "Do Civil and Political Repression Really Boost Foreign Direct Investments?," CESifo Working Paper Series 421, CESifo Group Munich.
  10. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  11. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  12. 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.
  13. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
  14. Basu, Kaushik, 1998. "Child labor : cause, consequence, and cure, with remarks on International Labor Standards," Policy Research Working Paper Series 2027, The World Bank.
  15. John F. Helliwell, 1992. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc.
  16. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
  17. 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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