Does Trade Openess Affect Core Labor Standards ?.

Abstract

Based on cross-country data from a wide range of developed and developing countries, this study, using an original and synthetic indicator, empirically analyses the incidence of openness to trade on the level of core labour standards. In the first part of our study, when the model is estimated through the OLS method, we find a positive and significant influence of trade on core labour standards. However, literature leads us to assume that trade openness is endogenous. In the second part, using the instrumental variables (IV) method, we show that openness to trade is no longer significant. We test different vectors of instruments that validate the robustness of our results. We conclude that, in the ongoing debate about the incidence of trade openness on the level of core labour standard, increasing openness would not lead to a levelling down, but rather labour standards would depend on national characteristics such as economic and social development.Labour standards; Trade openness; Instrumental variables method;