2022/09/15 by Alessandro Guasti, Mathias Koenig‐Archibugi · 1 citation
Economics, Econometrics and Finance · #Global trade and economics #Economic Policies and Impacts #Regional Economics and Spatial Analysis
paper · pdf · doi:10.1093/isq/sqac061
openalex publication_date 2022/09/15 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/26
Abstract The possibility that economic competition puts working and employment conditions under pressure is a frequently voiced concern in debates on international trade. We provide an empirical assessment of the argument that competition for world markets has generated a race to the bottom in labor standards. Spatial econometrics is used to identify interdependence in labor practices among trade competitors. We present a strategy for measuring export competition between countries that fulfills several criteria: It reflects actual competition between firms offering similar products, rather than export similarity in relation to a few very broad product categories; it captures not only what competitor countries export but also how much; it takes into account that states are exposed to export competition to different degrees; and it focuses on the downward pressure stemming from a deterioration of labor rights protections among close competitors. To address endogeneity, we implement a two-stage least-squares (2SLS) instrumental variable approach and a difference two-stage generalized method of moments (GMM) approach. We find no evidence that export competition has triggered a race to the bottom in two samples covering most states in the world over nearly three decades. The finding is robust to a variety of alternative specifications.