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Labor standards, labor-management bargaining and international rivalry

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  • Hur, Jung
  • Zhao, Laixun

Abstract

Using the labor union's bargaining power as an indication of government policy on labor standards issues, we analyze the competition between a domestic (North) firm and a foreign (South) firm, and their relationship with optimal labor standards (LS). First, we show that the optimal level of LS is higher when labor unions are employment-oriented than when they are not. Second, it is higher under free trade than under the optimal tariff system if labor unions are employment-oriented. Third, 'a race to the bottom' of LS occurs in the case of wage-oriented unions. Fourth, the North's imposing a tariff to force the Southern government to raise its LS is effective only if the Southern union is wage-oriented. In order to raise Southern LS, both countries may need some deeper form of economic integration, if the North does not want to abandon its free trade system.

Suggested Citation

  • Hur, Jung & Zhao, Laixun, 2009. "Labor standards, labor-management bargaining and international rivalry," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 259-272, August.
    • Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:259-272
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    Cited by:

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    2. Lee, Ki-Dong & Lee, Woohyung, 2016. "Exports versus export-platform FDI with endogenous wage determination," Economic Modelling, Elsevier, vol. 54(C), pages 479-489.

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