Has global trade competition really led to a race to the bottom in labor standards?

Alessandro Guasti and Mathias Koenig-Archibugi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The possibility that economic competition puts working and employment conditions under pressure is a frequently voiced concern in debates on international trade. We provide an empirical assessment of the argument that competition for world markets has generated a race to the bottom in labor standards. Spatial econometrics is used to identify interdependence in labor practices among trade competitors. We present a strategy for measuring export competition between countries that fulfills several criteria: It reflects actual competition between firms offering similar products, rather than export similarity in relation to a few very broad product categories; it captures not only what competitor countries export but also how much; it takes into account that states are exposed to export competition to different degrees; and it focuses on the downward pressure stemming from a deterioration of labor rights protections among close competitors. To address endogeneity, we implement a two-stage least-squares (2SLS) instrumental variable approach and a difference two-stage generalized method of moments (GMM) approach. We find no evidence that export competition has triggered a race to the bottom in two samples covering most states in the world over nearly three decades. The finding is robust to a variety of alternative specifications.

Keywords: British Academy/Leverhulme research grant. The BA grant scheme was financially supported by the UK Department for Business; Energy and Industrial Strategy (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2022-12-01
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in International Studies Quarterly, 1, December, 2022, 66(4). ISSN: 1468-2478

Downloads: (external link)
http://eprints.lse.ac.uk/113752/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:113752

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().