Economic Competition, Policy Interdependence, and Labour Rights

Extant scholarship treats national policies concerning labour rights as a function of economic factors and yet neglects influences of policies among economically competing states. Relying on the policy interdependence theory, this study argues that labour rights policy in a state is dependent on its economic competitors' labour policy decisions. It specifically maintains that the intensifying competition for foreign direct investment and exports as well as against imports channels negative externalities of deteriorating labour protection in competing states which drives expansive downward policy mimicking and leads to a global decline in labour rights - a race to the bottom. Utilising spatial econometric technique to analyse a new data on labour rights for the period 1994-2009, it finds that labour rights practices are interdependent among economic competitors and experience global deteriorations; whereas labour rights laws remain largely independent due to high policy and reputational costs of lowering them and show more fluctuations.