Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74021
Authors: 
Naghavi, Alireza
Year of Publication: 
2005
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 17.2005
Abstract: 
This paper studies the behavior of firms towards weak labor rights in developing countries (South). A less than perfectly elastic labor supply in the South gives firms oligopsonistic power tempting them to strategically reduce output to cut wages. In an open economy, competitors operating in perfectly competitive labor markets meanwhile enjoy less aggressive competitors and raise output. Finally, competition effect reduces the ex-post output of a relocating firm. These effects reduce relative profitability of the South casting doubts on traditional beliefs that multinationals are attracted to regions with lower wages. Adopting a minimum wage unambiguously enhances Southern competitiveness and welfare.
Subjects: 
Labor standards
Labor market imperfection
Oligopsony
Location of firms
Minimum wages
Strategic behavior
Multinationals
Southern welfare
JEL: 
J80
F23
J42
F12
R38
L13
Document Type: 
Working Paper

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