Globalization, Working Conditions and Labor Rights: Implications for Developing Countries

Evidence from a broad sample of industrialized and developing countries is used to examine the links between globalization and labor conditions and to formulate implications for India and other developing countries. Cross-country instrumental variable analysis demonstrates that no direct link between openness and working conditions exists. Trade liberalization improves working conditions indirectly by raising per capita income. Empirical analyses also show the adoption of a free trade policy is associated with lower child labor rates and greater civil liberties. Ordinary least squares and instrumental variable estimates find significantly larger male-female wage differences in countries with open trade polices, ceteris paribus. Underlying reasons for this result are unclear and data used in the analysis are not ideal. Though the role of international labor standards may be limited, target policies that expand the opportunities of specific groups in India and other developing countries merit serious consideration. It is these policies, rather than restrictions on globalization, that hold the potential to improve labor conditions around the world.