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

  • Ronald B. Davies

    ()

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

  • Krishna Chaitanya Vadlamannati

    ()

    (University of Heidelberg)

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.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp385.

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Length: 39 pages
Date of creation: Nov 2011
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Handle: RePEc:iis:dispap:iiisdp385
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