Do Low Standards Harm Developed Nations ?
Are there significant international spillover effects of nations not respecting core labor standards? The answer hinges to some degree on how standards or the absence of them affects the trade competitiveness of third world production. From a purely theoretical perspective using a standard neoclassical production and trade model, it would appear that raising standards would reduce the amount of (labor-intensive) exports supplied to the world market. Production and exports of labor intensive goods would fall due to the Rybczynski theorem as the supply of unskilled labor in the economy is reduced by restricting child labor or by “using-up” labor in improving worker conditions. Raising wages by allowing union activity would also result in a higher relative price for the labor intensive items and therefore fewer exports. This result would be expected even in the case where most of the workers subject to low standards were in the non-traded sector since the critical issue concerns how the o
