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Sweatshop Equilibrium

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  • Chau, Nancy H.

    (Cornell University)

Abstract

This paper presents a capability-augmented model of on the job search, in which sweatshop conditions stifle the capability of the working poor to search for a job while on the job. The augmented setting unveils a sweatshop equilibrium in an otherwise archetypal Burdett-Mortensen economy, and reconciles a number of oft noted yet perplexing features of sweatshop economies. We demonstrate existence of multiple rational expectation equilibria, graduation pathways out of sweatshops in complete absence of enforcement, and country-specific efficiency and distributional responses to competitive forces and social safety nets depending precisely on whether graduation criteria are met.

Suggested Citation

  • Chau, Nancy H., 2009. "Sweatshop Equilibrium," IZA Discussion Papers 4363, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4363
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    References listed on IDEAS

    as
    1. Carol Ann Rogers & Kenneth A. Swinnerton, 2008. "A theory of exploitative child labor," Oxford Economic Papers, Oxford University Press, vol. 60(1), pages 20-41, January.
    2. Benjamin Powell & David Skarbek, 2006. "Sweatshops and Third World Living Standards: Are the Jobs Worth the Sweat?," Journal of Labor Research, Transaction Publishers, vol. 27(2), pages 263-274, April.
    3. Fields, Gary S., 1989. "On-the-job search in a labor market model : Ex ante choices and ex post outcomes," Journal of Development Economics, Elsevier, vol. 30(1), pages 159-178, January.
    4. Arnab K. Basu & Nancy H. Chau, 2003. "Targeting Child Labor in Debt Bondage: Evidence, Theory, and Policy Implications," The World Bank Economic Review, World Bank, vol. 17(2), pages 255-281, December.
    5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, April.
    6. repec:eee:labchp:v:1:y:1986:i:c:p:641-692 is not listed on IDEAS
    7. Banerjee, Biswajit & Bucci, Gabriella A, 1995. "On-the-Job Search in a Developing Country: An Analysis Based on Indian Data on Migrants," Economic Development and Cultural Change, University of Chicago Press, vol. 43(3), pages 565-583, April.
    8. Blau, David M, 1991. "Search for Nonwage Job Characteristics: A Test of the Reservation Wage Hypothesis," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 186-205, April.
    9. Drusilla K. Brown, 2000. "International Trade and Core Labor Standards: A Survey of the Recent Literature," Discussion Papers Series, Department of Economics, Tufts University 0005, Department of Economics, Tufts University.
    10. Brown, D.K. & deardroff, A.V. & Stern, R.M., 1997. "Issues of Environmental and Labor Standards in the Global Trading System," Papers 97-10, Michigan - Center for Research on Economic & Social Theory.
    11. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
    12. Arnab K. Basu & Nancy H. Chau, 2004. "Exploitation of Child Labor and the Dynamics of Debt Bondage," Journal of Economic Growth, Springer, vol. 9(2), pages 209-238, June.
    Full references (including those not matched with items on IDEAS)

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    1. Sweatshop equilibrium
      by Economic Logician in Economic Logic on 2009-09-22 19:59:00

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    More about this item

    Keywords

    capability deficits; on the job search; sweatshop equilibrium;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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