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Revenue Substitution? How Foreign Aid Inflows Moderate the Effect of Bilateral Trade Pressures on Labor Rights

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  • Lim, Sijeong
  • Mosley, Layna
  • Prakash, Aseem

Abstract

This paper investigates how foreign aid inflows moderate bilateral trade-based pressures on the exporting countries’ labor rights. Because aid provides additional resources to recipient governments, it reduces the importance aid-recipient governments attach to the preferences of their export partners. Consequently, aid inadvertently moderates the leverage exercised by importing countries on the governments of exporting, developing countries. Our analysis of a panel of 91 aid recipient countries for the period 1985–2002 lends support to the “revenue substitution” hypothesis. When aid levels are low, bilateral trade-based pressures are associated with improved labor rights. As aid levels rise, however, the effect loses significance.

Suggested Citation

  • Lim, Sijeong & Mosley, Layna & Prakash, Aseem, 2015. "Revenue Substitution? How Foreign Aid Inflows Moderate the Effect of Bilateral Trade Pressures on Labor Rights," World Development, Elsevier, vol. 67(C), pages 295-309.
    • Handle: RePEc:eee:wdevel:v:67:y:2015:i:c:p:295-309
    DOI: 10.1016/j.worlddev.2014.10.025
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    Cited by:

    1. Messerschmidt, Luca & Janz, Nicole, 2023. "Unravelling the ‘race to the bottom’ argument: Foreign direct investment and different types of labour rights," World Development, Elsevier, vol. 161(C).
    2. Luca Messerschmidt & Nicole Janz, 2020. "Unravelling the 'race to the bottom' argument: How does FDI affect different types of labour rights?," Munich Papers in Political Economy 05, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    3. repec:bla:glopol:v:8:y:2017:i:s3:p:66-77 is not listed on IDEAS
    4. Fon, Roger & Alon, Ilan, 2022. "Governance, foreign aid, and Chinese foreign direct investment," LSE Research Online Documents on Economics 113678, London School of Economics and Political Science, LSE Library.
    5. Lim, Sijeong & Prakash, Aseem, 2017. "Do Economic Problems at Home Undermine Worker Safety Abroad?: A Panel Study, 1980–2009," World Development, Elsevier, vol. 96(C), pages 562-577.
    6. Fragkiskos Filippaios & Fatima Annan-Diab & Amir Hermidas & Charikleia Theodoraki, 2019. "Political governance, civil liberties, and human capital: Evaluating their effect on foreign direct investment in emerging and developing economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(7), pages 1103-1129, September.
    7. Dursun Peksen & Robert G. Blanton, 2017. "The impact of ILO conventions on worker rights: Are empty promises worse than no promises?," The Review of International Organizations, Springer, vol. 12(1), pages 75-94, March.
    8. Luc Fransen & Brian Burgoon & Sijeong Lim & Aseem Prakash, 2017. "From Quality Control to Labor Protection: ISO 9001 and Workplace Safety, 1993–2012," Global Policy, London School of Economics and Political Science, vol. 8, pages 66-77, May.

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