Labor-Management Bargaining, Labor Standards and International Rivalry

Jung Hur and Laixun Zhao

No 240, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Using the labor union's bargaining power as an indication of government policy on labor standards issues, we analyze the competition between a domestic (North) firm and a foreign (South) firm, and their relationship with optimal labor standards (LS). First, we show that the optimal level of LS is higher when labor unions are employment-oriented than when they are not. Second, it is higher under free trade than under the optimal tariff system if labor unions are employment-oriented. Third, 'a race to the bottom' of LS occurs in the case of wage-oriented unions. Fourth, the North's imposing a tariff to force the Southern government to raise its LS is effective only if the Southern union is wage-oriented. In order to raise Southern LS, both countries may need some deeper form of economic integration, if the North does not want to abandon its free trade system.

Keywords: Labor Standards; Race to the Bottom; Tariff; Economic Integration; Labor Union (search for similar items in EconPapers)
JEL-codes: F10 F16 J50 J80 L13 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-04
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (2)

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