Core labour standards and FDI: Friends or foes? The case of child labour

Sebastian Braun

No 2006-014, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: We test the often-cited hypothesis that high levels of child labour attract foreign investors. Using panel data we show the overall effect, which child labour has on foreign direct investment (FDI), to be a (small) negative one. We find strong evidence for the theoretical prediction that child labour deters FDI by slowing down economic development. Weaker evidence is provided for our theoretical prediction that child labour can discourage FDI via its impact on the availability of a skilled labour force in an economy. The data do not indicate that high levels of child labour drive down the factor share of labour, thereby increasing the attractiveness of an economy for foreign investors.

Keywords: child labour; FDI; core labour standards (search for similar items in EconPapers)
JEL-codes: C33 F23 J82 (search for similar items in EconPapers)
Date: 2006
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Journal Article: Core Labour Standards and FDI: Friends or Foes? The Case of Child Labour (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2006-014

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