A Race to the Bottom in Labour Standards? An Empirical Investigation

38 Pages Posted: 9 Jan 2017

See all articles by Ronald B. Davies

Ronald B. Davies

University College Dublin (UCD)

Krishna Chaitanya Vadlamannati

University College Dublin (UCD) - Department of Politics

Date Written: January 5, 2017

Abstract

Among the many concerns over globalization is that as nations compete for mobile firms, they will relax labour standards as a method of lowering costs and attracting investment. Using spatial estimation on panel data for 148 developing countries over 18 years, we find that the labour standards in one country are positively correlated with the labour standards elsewhere (i.e. a cut in labour standards in other countries reduces labour standards in the country in question). This interdependence is more evident in labour practices (i.e. enforcement) than in labour laws. Further, competition is most fierce in those countries with already low standards.

Keywords: Labour Standards, Competition for FDI, Spatial Econometrics

JEL Classification: J83; F23; O19

Suggested Citation

Davies, Ronald B. and Vadlamannati, Krishna Chaitanya, A Race to the Bottom in Labour Standards? An Empirical Investigation (January 5, 2017). Journal of Development Economics, Vol. 103, 2013, Available at SSRN: https://ssrn.com/abstract=2894453

Ronald B. Davies

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland

Krishna Chaitanya Vadlamannati (Contact Author)

University College Dublin (UCD) - Department of Politics ( email )

Belfield
Dublin 4
Ireland

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