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Asymmetric labor markets and the location of firms: Are multinationals attracted to weak labor standards?
Author(s)
Date Issued
2003-10
Date Available
2010-01-19T14:26:47Z
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.
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Series
UCD Centre for Economic Research Working Paper Series
WP03/23
Classification
J80
F23
J42
F12
R38
L13
Subject – LCSH
International business enterprises--Location
Labor laws and legislation--Developing countries
Industrial location--Effect of labor market on
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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