A Stag Hunt Account and Defense of Transnational Labor Standards - a Preliminary Look at the Problem

Abstract

Labor standards with transnational application may be modeled as agreements among developing countries to overcome collective action problems, although this has not previously been done. Specifically, many labor standards arise in Stag Hunt games, in which there is a Pareto-optimal solution if, but only if, no player defects. Examples include bans on child labor or noxious work practices. It is not in any nation's interest to rely on child labor or poisonous work practices, and they play no role in optimum development strategies, but the country that defected from a ban on these practices might anticipate particular streams of trade or foreign direct investment, gains that we model as short-term. The model, in light of the behavioral literature on Stag Hunt games, has implications for the number of countries that can be bound by a labor standard, institutional aspects of labor standard formulation, subject matter of labor standards, and sanctions. There is thus no conflict between transnational labor standards, and the theory of comparative advantage, since countries adopt only labor standards that are in their interest.

JEL Classification: C70, F00, K31, K33