Working Paper: CEPR ID: DP2687
Authors: Nancy H. Chau; Ravi Kanbur
Abstract: The dominant perspective in discussions of labour and environmental standards and globalization is that of North-South competition and its impact on Northern standards. This Paper presents an alternative perspective, that of South-South competition to export to the North, and its impact on Southern standards. It develops a simple model of Southern competition on standards, which can begin to provide insights into some key questions. A Southern race to the bottom is possible but not inevitable. It depends intricately on the Northern demand curve, the size of big exporters relative to each other, and the relative size of the competitive fringe of small exporters ? a precise and complete characterization is developed in the Paper. The Paper also analyses the effect of Northern tariffs on Southern strategic competition in standards. It is shown that Northern trade protectionism undermines Southern standards.
Keywords: labour and environmental standards; logconcavity and logconvexity; race to the bottom; strategic complementarity and substitutability; trade restrictions
JEL Codes: F16; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Chinese trade competition (F14) | labor and environmental standards in India (J80) |
| small exporters with lower standards increase market share (F12) | downward pressure on standards in larger exporters like India (F14) |
| lower standards in small exporters (F14) | lower standards in larger exporters (F14) |
| higher standards among large exporters (F14) | adoption of high standards by other big exporters (F18) |
| northern tariffs (N91) | undermine southern standards (J82) |
| northern tariffs (N91) | diminish incentives for big southern exporters to adopt high standards (F14) |