Resolving the Paradox of Social Standards and Export Competitiveness

23 Pages Posted: 14 Sep 2007

See all articles by Stephen B. DeLoach

Stephen B. DeLoach

Elon University

Jayoti Das

Elon University - Martha and Spencer Love School of Business

Date Written: September 10, 2007

Abstract

Over the last decade there has been increasing international pressure on countries to raise "social standards" (i.e., production standards based on environmental and labor conditions). Currently, the World Trade Organization does not allow countries to impose minimum standards on imports based on environmental or labor standards because it is assumed to undermine competition. There is no consensus in the empirical literature, however, to support this claim. In fact, the evidence suggests that while stronger environmental standards hurt competitiveness, stronger labor standards do the opposite. This paper offers one possible explanation for this paradox. In a simple model of incomplete information, externally-imposed standards may either increase or decrease the competitiveness of infant firms from developing countries depending on the degree of complementarity between the standard and the production of high-quality goods.

Keywords: asymmetric information, competitiveness, product quality, production standards

JEL Classification: F18, Q56, D82, L15

Suggested Citation

DeLoach, Stephen B. and Das, Jayoti, Resolving the Paradox of Social Standards and Export Competitiveness (September 10, 2007). Available at SSRN: https://ssrn.com/abstract=1013450 or http://dx.doi.org/10.2139/ssrn.1013450

Stephen B. DeLoach (Contact Author)

Elon University ( email )

Department of Economics
Campus Box 2075
Elon, NC 27244
United States
336-278-5943 (Phone)
336-278-5952 (Fax)

Jayoti Das

Elon University - Martha and Spencer Love School of Business ( email )

Department of Economics
Campus Box 2075
Elon, NC 27244
United States
336-278-5941 (Phone)
336-278-5952 (Fax)

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