Trade and Labor Standards in the European Union: A Gravity Model Approach
Using a gravity model, we examine whether labor standards are important determinants of bilateral export performance for EU-15 countries over the period 1988-2001. We assess the conventional wisdom that countries with low labor standards and less stringent regulations have performed better in terms of trade performance, and we use a panel data set in a triple-indexed gravity model to conduct our empirical investigation. We find several instances where improvements in labor standards are related to improvements in export performance, suggesting that productivity improvements as a result of better standards outweigh the costs of these standards themselves. These results are robust to the choice of dependent variable, specification tests, and robustness checks. The standard variables used in gravity equations conform to theoretical expectations and are highly significant.
|Keywords||gravity equation, international trade, labor standards|
|Journal||International Trade Journal|
Samy, Y, & Dehejia, V. (2011). Trade and Labor Standards in the European Union: A Gravity Model Approach. International Trade Journal, 25(5), 581–618. doi:10.1080/08853908.2011.604300