The Effects of Core Workers Rights on Labour Costs and Foreign Direct Investment: Evaluating the "Conventional Wisdom"

IILS Working Paper No. 130

52 Pages Posted: 10 Jun 2002

See all articles by David Kucera

David Kucera

International Labour Organization (ILO)

Date Written: 2001

Abstract

This paper addresses what has been referred to as the "conventional wisdom" that foreign investors favour countries with lower labour standards. The paper uses new country-level measures of worker rights (constructed from coding textual information and emphasizing de facto considerations) in econometric models of foreign direct investment (FDI) inflow s and manufacturing wages in samples of up to 127 countries. The wage model is used to address a key hypothesized mediating link between worker rights and FD I, but also considered are other possible causal channels through which worker rights might influence FDI, such as through enhancing political an d social stability and human capital development. Worker rights addressed are in regard to freedom of association and collective bargaining, child labour, and gender discrimination and inequality. Consistent with prior studies, no solid evidence is found in support of the "conventional wisdom," with all evidence of statistical significance pointing in the opposite direction.

Keywords: decent work, david kucera, international labour office, international institute for labour studies, the effects of core, workers rights on labour costs, foreign direct investment

Suggested Citation

Kucera, David, The Effects of Core Workers Rights on Labour Costs and Foreign Direct Investment: Evaluating the "Conventional Wisdom" (2001). IILS Working Paper No. 130, Available at SSRN: https://ssrn.com/abstract=313079 or http://dx.doi.org/10.2139/ssrn.313079

David Kucera (Contact Author)

International Labour Organization (ILO) ( email )

Route des Morillons 4
Geneva, 1211
Switzerland

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