Race to the bottom?

by on November 23, 2004 at 7:52 am in Economics | Permalink

There is no evidence that corporations direct their investment to countries that have lower labor or environmental standards.  The bivariate relationship between foreign direct investment and labor standards is strongly positive, given that in the past decades more than 90% of FDI occurs in OECD countries, which have the highest labor standards.  Multivariate tests show no correlation between foreign direct investment and labor standards.  An International Labor Organization report reveals no evidence that countries with strong trade union presence have suffered any loss of investment in their EPZs [export processing zones].  A World Bank survey notes a strong positive correlation between higher occupational safety and health conditions and foreign investment in EPZs.  In-depth reviews of EPZs where labor standards are abused reveal that the problem is insufficient access to the global economy.  AS EPZs attract a greater number of foreign investors, labor conditions improve across the entire zone.

That’s from Daniel Drezner’s recently submitted book-in-progress, on globalization and governance, which of course I devoured immediately.  By the way, here is Dan’s first post ever, on the relationship between books and blogs.

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