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Does Compliance Pay? Social Standards and Firm‐Level Trade

Author

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  • Greg Distelhorst
  • Richard M. Locke

Abstract

What is the relationship between trade and social institutions in the developing world? The research literature is conflicted: Importing firms may demand that trading partners observe higher labor and environmental standards, or they may penalize higher standards that raise costs. This study uses new data on retailers and manufacturers to analyze how firm‐level trade responds to information about social standards. Contrary to the “race to the bottom” hypothesis, it finds that retail importers reward exporters for complying with social standards. In difference‐in‐differences estimates from over 2,000 manufacturing establishments in 36 countries, achieving compliance is associated with a 4% [1%, 7%] average increase in annual purchasing. The effect is driven largely by the apparel industry—a long‐term target of anti‐sweatshop social movements—suggesting that activist campaigns can shape patterns of global trade.

Suggested Citation

  • Greg Distelhorst & Richard M. Locke, 2018. "Does Compliance Pay? Social Standards and Firm‐Level Trade," American Journal of Political Science, John Wiley & Sons, vol. 62(3), pages 695-711, July.
    • Handle: RePEc:wly:amposc:v:62:y:2018:i:3:p:695-711
    DOI: 10.1111/ajps.12372
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    Citations

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    Cited by:

    1. Céline Carrère & Marcelo Olarreaga & Damian Raess, 2022. "Labor clauses in trade agreements: Hidden protectionism?," The Review of International Organizations, Springer, vol. 17(3), pages 453-483, July.
    2. Banerjee, Soumendra Nath & Roy, Jayjit & Yasar, Mahmut, 2021. "Exporting and pollution abatement expenditure: Evidence from firm-level data," Journal of Environmental Economics and Management, Elsevier, vol. 105(C).
    3. Abhishek Dutta & Debarati Ghosh & Meghna Dutta, 2024. "Can borrowing constraints enhance environmental sustainability? An alternative parametric approach," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 2683-2693, May.
    4. Raymond Robertson & Drusilla Brown & Rajeev Dehejia, 2021. "Working conditions and factory survival: Evidence from better factories Cambodia," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 228-254, February.
    5. Mari Tanaka, 2020. "Exporting Sweatshops? Evidence from Myanmar," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 442-456, July.
    6. Klymak, Margaryta, 2023. "The trade effects of information provision about forced and child labor," World Development, Elsevier, vol. 167(C).
    7. Matthew Amengual & Greg Distelhorst & Danny Tobin, 2020. "Global Purchasing as Labor Regulation: The Missing Middle," ILR Review, Cornell University, ILR School, vol. 73(4), pages 817-840, August.
    8. Elisa Navarra, 2022. "Stock Market Response to Firms’ Misconduct," Working Papers ECARES 2022-40, ULB -- Universite Libre de Bruxelles.
    9. Mark Anner, 2019. "Addressing Workers’ Rights Violations in Apparel and Agricultural Supply Chains through Binding, Cost-Sharing Accords," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 8(1-2), pages 93-114, April.
    10. Jean‐Christophe Graz & Jimena Sobrino Piazza & André Walter, 2022. "Labour Standards in Global Production Networks: Assessing Transnational Private Regulation and Workers’ Capacity to Act," Development and Change, International Institute of Social Studies, vol. 53(4), pages 912-937, July.
    11. Raess, Damian & Wagner, Patrick, 2022. "South to north investment linkages and decent work in Brazil," Papers 1382, World Trade Institute.
    12. Kolcava, Dennis & Smith, E. Keith & Bernauer, Thomas, 2022. "Public Preference Formation Towards Sustainable Global Supply Chains Policy," OSF Preprints 2hez9, Center for Open Science.
    13. Nandini Ramamurthy, 2021. "Is Work Organisation Causing Precariousness? Insights from Textile Industry in South India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(4), pages 1115-1134, December.
    14. Alice Evans, 2019. "Incentivising Pro-Labour Reforms," CID Working Papers 349, Center for International Development at Harvard University.
    15. Albert Chiu & Xingchen Lan & Ziyi Liu & Yiqing Xu, 2023. "Causal Panel Analysis under Parallel Trends: Lessons from A Large Reanalysis Study," Papers 2309.15983, arXiv.org, revised Nov 2024.
    16. Laura T. Raynolds, 2021. "Gender equity, labor rights, and women’s empowerment: lessons from Fairtrade certification in Ecuador flower plantations," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 38(3), pages 657-675, September.
    17. Lilac Nachum, 2021. "Value distribution and markets for social justice in global value chains: Interdependence relationships and government policy," Journal of International Business Policy, Palgrave Macmillan, vol. 4(4), pages 541-563, December.
    18. Herkenhoff, Philipp & Krautheim, Sebastian, 2022. "The international organization of production in the regulatory void," Journal of International Economics, Elsevier, vol. 137(C).
    19. Mark Anner & Matthew Fischer-Daly & Michael Maffie, 2021. "Fissured Employment and Network Bargaining: Emerging Employment Relations Dynamics in a Contingent World of Work," ILR Review, Cornell University, ILR School, vol. 74(3), pages 689-714, May.
    20. Carlo Pietrobelli & Roberta Rabellotti & Ari Van Assche, 2021. "Making sense of global value chain-oriented policies: The trifecta of tasks, linkages, and firms," Journal of International Business Policy, Palgrave Macmillan, vol. 4(3), pages 327-346, September.
    21. Stephanie BARRIENTOS & Lara BIANCHI & Cindy BERMAN, 2019. "Gender and governance of global value chains: Promoting the rights of women workers," International Labour Review, International Labour Organization, vol. 158(4), pages 729-752, December.
    22. Anthony Goerzen & Simon Peter Iskander & Joerg Hofstetter, 2021. "The effect of institutional pressures on business-led interventions to improve social compliance among emerging market suppliers in global value chains," Journal of International Business Policy, Palgrave Macmillan, vol. 4(3), pages 347-367, September.
    23. Mari Tanaka, 2023. "Ethical production and export performance across destinations: evidence from Myanmar," The Japanese Economic Review, Springer, vol. 74(3), pages 413-437, July.

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