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How Bad is Globalization for Labour Standards in the North?

  • Alejando Donado

    ()

    (Department of Economics, University of Würzburg, Germany)

  • Klaus Wälde

    (Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, Germany)

We analyse a world consisting of 'the North'and 'the South' where labour stan- dards in the North are set by trade unions. Standards set by unions tend to increase output and welfare. There are no unions in the South and work stan- dards are suboptimal. Trade between these two countries can imply a reduction in work standards in the North. Moreover, when trade unions are established in the South, the North, including northern unions, tend to lose. Quantitatively, these effects are small and overcompensated by gains in the South. The existing empirical literature tends to support our findings.

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File URL: http://www.macro.economics.uni-mainz.de/RePEc/pdf/Discussion_Paper_1011.pdf
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Paper provided by Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz in its series Working Papers with number 1011.

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Length: 29 pages
Date of creation: 19 Aug 2010
Date of revision: 19 Aug 2010
Handle: RePEc:jgu:wpaper:1011
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  1. Davies, Ronald B. & Voy, Annie, 2009. "The effect of FDI on child labor," Journal of Development Economics, Elsevier, vol. 88(1), pages 59-66, January.
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