Attracting Investment: Governments' Strategic Role in Labor Rights Protection

Payton, Autumn Lockwood; Woo, Byungwon

doi:10.1111/isqu.12138

Cited by 22 publications

(19 citation statements)

References 26 publications

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“…Other analyses suggest that foreign direct investment also could be a mechanism for rights‐related improvements, especially when multinational corporations avoid locating production in jurisdictions with questionable rights‐related records. If developing country governments are keen to attract FDI, due to its potential positive effects on wages, employment, and/or technological development, such a linkage might further incentivize upgrading (Barry et al 2013, Payton and Woo 2014; but also see Arel‐Bundock, 2017, Bodea & Ye, 2018, Garriga, 2016).…”

Section: Worker Rights and Global Supply Chains: Mechanisms For Upgradingmentioning

confidence: 99%

Labor upgrading and export market opportunities: Evidence from Vietnam

Malesky

Mosley

2021

Economics & Politics

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We explore and provide an empirical assessment of an important mechanism by which global markets can motivate labor‐related upgrading among developing country firms. New market opportunities, which result from exogenous shocks, can some producers to improve their treatment of workers. These improvements come because they are consistent with taking advantage of new opportunities. We focus specifically on how shifts in U.S. trade policy toward China in 2018 affect the willingness of foreign firms operating in Vietnam to engage in upgrading. Our analyses, based on surveys of firms in 2016, 2017, and 2018, suggest that firms respond significantly to changes in market opportunities, especially when they are primed to consider specific supply chain relationships. This market opportunity mechanism for upgrading contrasts with another widely used tool, in which developed country governments condition access to their markets upon improved human and labor rights outcomes. The former operates, in the short to medium term, at the firm level, while the latter seeks to effect change at the country level.

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Section: Worker Rights and Global Supply Chains: Mechanisms For Upgradingmentioning

confidence: 99%

Labor upgrading and export market opportunities: Evidence from Vietnam

Malesky

Mosley

2021

Economics & Politics

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“…Merk (), for example, finds that large multinational apparel manufacturers, many of them headquartered in Hong Kong, Korea, and Taiwan, locate subsidiaries throughout Asia and Latin America and use the threat of relocation to press for lenient labor regulations. Congruent with this case study research, Payton and Woo () present a formal model and quantitative evidence showing that countries with weaker labor laws attract FDI . According to this view, firms that receive FDI strive to reduce their production costs, including labor costs, to please their foreign investors.…”

Section: Globalization and Employers’ Opinionsmentioning

confidence: 95%

Who opposes labor regulation? Explaining variation in employers’ opinions

Amengual

Coslovsky

Yang

2017

Regulation & Governance

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Competing accounts of the effect of globalization on labor politics agree that firms influence regulations, but make contrasting predictions for which firms are most likely to oppose regulations. Using survey data from employers in 19,000 manufacturing firms in 82 developing countries, we examine the determinants of employers' opinions towards labor regulation. In contrast to the predictions of optimistic theories of globalization, we find that (1) firms that export are more likely to have negative opinions towards labor regulation than those that sell domestically, and (2) firms that receive foreign direct investment have similar views as firms that rely only on domestic capital. Further, we show that systematic differences in employers' opinions depend on the intensity of the competitive pressures they face and their use of skilled workers. In doing so, we provide an empirically grounded account of the heterogeneous opinions of key actors in economic policy-making in developing countries.

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“…Foreign firms have tended to hire unskilled, blue-collar labour at lower pay than domestic firms in developing countries (Coniglio et al, 2015). However, Payton and Woo (2014) argue that FDI inflows decrease with stricter labour regulations owing to rising costs of adherence, raising cost-efficiency concerns for foreign investors, even those intending to venture into developed Organisation for Economic Co-operation and Development (OECD) countries (Alam and Shah, 2013). So simply using minimum wages as the measurement of unit labour costs will definitely predict a reduced number of FDI projects in a country, as found in a hospitality industry study (Falk, 2016).…”

Section: Literaturementioning

confidence: 99%

How does employment respond to minimum wage adjustment in China?

Wye

Bahri

2020

The Economic and Labour Relations Review

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Under what circumstances can minimum wages increase without adverse effects on employment levels? In 31 Chinese provinces between 2004 and 2015, the employment effect of a minimum wage depended on the minimum wage level, foreign direct investment, per capita gross domestic product and labour productivity. A minimum wage increase reduced hiring as foreign direct investment inflow rose, regardless of the amount of investment. Any positive employment effect of a minimum wage increase was mitigated by per capita gross domestic product growth, except when per capita gross domestic product was above the average. Above-average labour productivity enhancement significantly mitigated the adverse employment effect of the minimum wage. Employers responded to a rising minimum wage by increasing hiring when the geometric growth rates of the minimum wage and foreign direct investment for a particular province within a period of time were above the overall average across provinces. However, they scrutinised both annual and overall economic growth within a time period when making hiring decisions in the face of minimum wage adjustments. An inverted U-shape relationship between minimum wages and employment suggest a maximum threshold value for the minimum wage. Thus, government policy measures should foster short-term and long-term economic growth, to facilitate employment creation when minimum wages increase. JEL Codes: J38, J21, F16, O40

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Attracting Investment: Governments' Strategic Role in Labor Rights Protection

Cited by 22 publications

References 26 publications

Labor upgrading and export market opportunities: Evidence from Vietnam

Labor upgrading and export market opportunities: Evidence from Vietnam

Who opposes labor regulation? Explaining variation in employers’ opinions

How does employment respond to minimum wage adjustment in China?

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