The effect of International Trade Agreements on labour standards in developing countries

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Current literature show that the effect of globalization on labour standards could be ambiguous. On the one hand, globalization could accommodate a ‘race to the bottom’ regarding labour standards, but on the other hand globalization could also enhance cooperation and increase moral awareness of the importance of labour standards. However, the effect of international trade deals, as a facilitator of globalization, on labour standards is underexposed, while this could be of interest for developing countries. Looking at the theory regarding this effect would suggest that there could be a positive relationship, but empirical literature about this topic is lacking surprisingly. Therefore, this research discusses that trade deals could have a positive effect on labour standards via four main ways, namely via development, empowerment, institution building and legal improvement. To measure labour standards, a Labour Standards Index has been constructed, based on the five core articles of the ILO. The results of the cross-section OLI regression analysis show that there is a positive significant relationship between trade deals and labour standards, but that these finding must be interpreted carefully. Also, several robustness checks have been performed.
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