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The Ambiguous Outcome of NGOs’ Activism in Developing Countries

  • Michela Limardi

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    Many Developing Countries ratified ILO Fundamental Conventions and authorized local labour unions. Multinational companies producing in these countries pay more when NGOs campaigns take place and reputation counts. However, whether this external pressure from NGOs benefit local workers outside MNEs affiliates in host countries remains an open issue. Segmented and weak local labour unions often rely on external funding from the North and technical assistance by labour NGOs. They need to increase their visibility in the labour intensive sectors targeted by Northern donations and activism. To address these issues we develop a bargaining model adapted to peculiarities of labour market institutions in developing countries, i.e. external funding and the complementarity with labour NGOs. This model is estimated on data on Indonesian manufacturing firms, before and after the authorisation of labour unions, in sensitive and non sensitive sectors. We find that, in sector with visibility for labour unions, the net outcome on wages of the presence of NGOs is negative. The external fundings imply a distortion in the objective of labour unions, confronted with the constraint of increasing the employment in the formal sector.

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    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p555.

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    Date of creation: Sep 2011
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    Handle: RePEc:wiw:wiwrsa:ersa11p555
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    1. Gani Aldashev & Thierry Verdier, 2008. "When NGOs Go Global: Competition on International Markets for Development Donations," Carlo Alberto Notebooks 93, Collegio Carlo Alberto.
    2. Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
    3. Pedro S. Martins & Luiz A. Esteves, 2008. "Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil," Working Papers 14, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    4. Ann Harrison & Jason Scorse, 2010. "Multinationals and Anti-sweatshop Activism," American Economic Review, American Economic Association, vol. 100(1), pages 247-73, March.
    5. Pedro S. Martins, 2004. "Rent Sharing Before and After the Wage Bill," Discussion Paper Series, Department of Economics 200405, Department of Economics, University of St. Andrews.
    6. repec:dgr:uvatin:20030077 is not listed on IDEAS
    7. repec:hrv:faseco:4784029 is not listed on IDEAS
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