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Sweatshop Equilibrium

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  • Chau, Nancy

    () (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, 2009. "Sweatshop Equilibrium," IZA Discussion Papers 4363, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4363
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    References listed on IDEAS

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    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. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Brown, D.K. & Deardorff, A.V. & Stern, R.M., 1997. "Issues of Environmental and labor Standards in the Global Trading System," Working Papers 398, Research Seminar in International Economics, University of Michigan.
    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. Arnab K. Basu & Nancy H. Chau, 2003. "Targeting Child Labor in Debt Bondage: Evidence, Theory, and Policy Implications," World Bank Economic Review, World Bank Group, vol. 17(2), pages 255-281, December.
    10. 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.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sweatshop equilibrium
      by Economic Logician in Economic Logic on 2009-09-22 19:59:00

    More about this item

    Keywords

    sweatshop equilibrium; on the job search; capability deficits;

    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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