Does globalisation affect labour standards? : an empirical investigation

Abstract

Based on a large cross-section of developing and developed countries, this paper investigates the nexus between globalisation and four labour standards: freedom of association and the right to bargain collectively (FACB), freedom from forced labour (FL), abolition of child labour (CL) and non-discrimination (D). The question of central interest is whether trade and foreign investment affect the level of the four labour standards. FACB and FL are measured by newly constructed indices that emphasize de facto government compliance. Openness is measured by various trade and FDI indicators, which range from highly aggregated to highly disaggregated ones. The empirical results suggest that trade and foreign investment are in general associated with stricter labour standards. Special government initiatives which stimulate exports and FDI do, however, have an adverse effect on labour standards, and particularly, on FACB.