IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/193.html
   My bibliography  Save this paper

International Labor Standards and Southern Competition

Author

Listed:
  • Laixun Zhao

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This paper models the economic aspects of labor standards in an oligopolistic framework of three countries, incorporating labor-management negotiations in the North and monopsonic labor markets in Southern countries. Different from the literature, a higher LS not only requires a higher cost, but also benefits workers and induces them to work harder. Because of theselinks, Northern intervention, via import taxes or minimum LS regulation, may often have perverse effects on Southern countries. Nevertheless, such interventions may occur due to domestic unionization or pressure from global competition. Specifically, imposing a tariff against a certain Southern country to force up its LS does not work. Further, the tariff would shift production to another country. These shed light on why developing countries oppose including LS in WTO negotiations. We also find that union wages, employment and utility increase with a higher import tariff, which explains why unions are keen lobbies of raising LS in developing countries. Under minimum LS regulation in one Southern country, the LS and profits in the other Southern country and the utility of the Northern union may fall. Finally, as the empirical evidence shows, we demonstrate that multinational enterprises choose to locate in those developing countries whose LS is relatively higher rather than lower, because LS benefits workers and labor unions, and is thus productive.

Suggested Citation

  • Laixun Zhao, 2006. "International Labor Standards and Southern Competition," Discussion Paper Series 193, Research Institute for Economics & Business Administration, Kobe University.
  • Handle: RePEc:kob:dpaper:193
    as

    Download full text from publisher

    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp193.pdf
    File Function: First version, 2006
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
    2. Nancy H. Chau & Ravi Kanbur, 2006. "The Race to the Bottom, from the Bottom," Economica, London School of Economics and Political Science, vol. 73(290), pages 193-228, May.
    3. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
    4. Kyle Bagwell & Robert W. Staiger, 2001. "The WTO as a Mechanism for Securing Market Access Property Rights: Implications for Global Labor and Environmental Issues," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 69-88, Summer.
    5. Drusilla K. Brown, 2001. "Labor Standards: Where Do They Belong on the International Trade Agenda?," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 89-112, Summer.
    6. Leahy, Dermot & Montagna, Catia, 1999. "Unionisation and Foreign Direct Investment," CEPR Discussion Papers 2260, C.E.P.R. Discussion Papers.
    7. Jafarey, Saqib & Lahiri, Sajal, 2002. "Will trade sanctions reduce child labour?: The role of credit markets," Journal of Development Economics, Elsevier, vol. 68(1), pages 137-156, June.
    8. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    9. Brown, D.K. & Dearorff, A.V. & Stern, R.M., 1993. "International Labor Standards and Trade: A Theoretical Analysis," Working Papers 333, Research Seminar in International Economics, University of Michigan.
    10. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-122, February.
    11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Labor Standards; Labor Unions; Oligopoly; Trade Policy; North-South Issues;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:193. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University). General contact details of provider: http://edirc.repec.org/data/rikobjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.