Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72312
Authors: 
Naghavi, Alireza
Year of Publication: 
2003
Series/Report no.: 
Working Paper Series, UCD Centre for Economic Research 03/23
Abstract: 
This paper studies the strategic behavior of multinationals towards weak labor standards in developing countries (South). Without a marginal cost pricing policy, abundant labor in the South gives firms the power to set wages through their choice of output. A strategic reduction in output offsets or weakens direct gains from lower wages. In an open economy, it also increases output and profits of a competitor that operates in a perfect labor market. These effects lower profitability of locating in the South casting doubts on traditional beliefs that multinationals are always attracted to lower wages. Adopting standards enhances Southern welfare unambiguously.
Subjects: 
Labor standards
Labor market imperfection
Oligopsony
Location of firms
Wages
Strategic behavior
Multinationals
Welfare
JEL: 
J80
F23
J42
F12
R38
L13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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