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A Race to the Bottom in Labour Standards? An Empirical Investigation

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  • Ronald B. Davies

    (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo)

  • Krishna Chaitanya Vadlamannati

    (University of Heidelberg)

Abstract

Among the many concerns over globalization is that as nations compete for mobile firms, they will relax labour standards as a method of lowering costs and attracting investment. Using spatial estimation on panel data for 148 developing countries over 18 years, we find that the labour standards in one country are positively correlated with the labour standards elsewhere (i.e. a cut in labour standards in other countries reduces labour standards in the country in question). This interdependence is more evident in labour practices (i.e. enforcement) than in labour laws. Further, competition is most fierce in those countries with already low standards.

Suggested Citation

  • Ronald B. Davies & Krishna Chaitanya Vadlamannati, 2011. "A Race to the Bottom in Labour Standards? An Empirical Investigation," The Institute for International Integration Studies Discussion Paper Series iiisdp385, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp385
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    More about this item

    Keywords

    FLabour Standards; Competition for FDI; Spatial Econometrics;
    All these keywords.

    JEL classification:

    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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