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Do transnational corporations care about labour standards?

Author

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  • Busse, Matthias

Abstract

This paper explores the relationship between foreign direct investment, or the activities of transnational corporations, and core labour standards. It discusses the channels through which labour standards may influence foreign direct investment and presents the results of an empirical test of that linkage. The results show that, contrary to the conventional wisdom that transnational corporations engage predominately in countries with low standards, higher labour standards are positively associated with foreign direct investment inflows. Concerns about ?social dumping? or ?a race to the bottom? on such standards appear to be mistaken. This result even holds for poor developing countries.

Suggested Citation

  • Busse, Matthias, 2002. "Do transnational corporations care about labour standards?," HWWA Discussion Papers 182, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26298
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    File URL: https://www.econstor.eu/bitstream/10419/19344/1/182.pdf
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    References listed on IDEAS

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    1. Drusilla Brown & Alan Deardorff & Robert Stern, 1998. "Trade and Labor Standards," Open Economies Review, Springer, vol. 9(2), pages 171-194, April.
    2. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-544, September.
    3. Klein, Michael & Aaron, Carl & Hadjimichael, Bita, 2001. "Foreign direct investment and poverty reduction," Policy Research Working Paper Series 2613, The World Bank.
    4. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
    5. Martin, Will & Maskus, Keith E, 2001. "Core Labor Standards and Competitiveness: Implications for Global Trade Policy," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 317-328, May.
    6. George Psacharopoulos & Harry Anthony Patrinos, 1997. "Family size, schooling and child labor in Peru - An empirical analysis," Journal of Population Economics, Springer;European Society for Population Economics, vol. 10(4), pages 387-405.
    7. William N. Cooke & Deborah S. Noble, 1998. "Industrial Relations Systems and US Foreign Direct Investment Abroad," British Journal of Industrial Relations, London School of Economics, vol. 36(4), pages 581-609, December.
    8. Kjetil Bjorvatn & Hans Jarle Kind & Hildegunn Kyvik Nordås, 2002. "The Role of FDI in Economic Development," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 28, pages 109-126.
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    Cited by:

    1. Hemmer, Hans-Rimbert & Krüger, Ralf & Seith, Jennifer, 2006. "Ausländische Direktinvestitionen: Flankierende Maßnahmen des Staates," Discussion Papers in Development Economics 36, Justus Liebig University Giessen, Institute for Development Economics.

    More about this item

    Keywords

    Transnational Corporations; Foreign Direct Investment; Labour Standards; Cross-Country Regression Framework;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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