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

Guasti, Alessandro and Koenig-Archibugi, Mathias ORCID: 0000-0003-4637-9477 (2022) Has global trade competition really led to a race to the bottom in labor standards? International Studies Quarterly, 66 (4). ISSN 1468-2478

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Identification Number: 10.1093/isq/sqac061


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.

Item Type: Article
Official URL:
Additional Information: © 2022 The Authors
Divisions: Government
Subjects: H Social Sciences > HD Industries. Land use. Labor
Date Deposited: 15 Feb 2022 17:15
Last Modified: 07 Apr 2024 22:03

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