Kenzo Abe, Osaka University
Jota Ishikawa, Hitotsubashi University
Laixun Zhao, Kobe University

Abstract

This paper studies international labor standards (LS) in a North-South framework. We consider three regimes of LS: free choices, a policy game between two governments, and international harmonization. In the absence of trade restrictions, the North has a higher LS due to better technology. An import tariff reduces the Southern LS, contrary to conventional wisdom, since the tariff reduces the Southern output which lowers the Southern LS because LS is costly to obtain and contributes to final production. Under the policy game, the North produces a higher LS than under free choices of LS, arising out of the Northern governmentís welfare maximization behavior, which requires the North to expand output and increase LS. International harmonization under a uniform, minimum LS binding for both countries lowers Northern profits and welfare. A more efficient alternative is technology transfer at a positive reimbursement. It is shown that both countries can obtain higher profits and welfare without intervention by governments or international organizations.

Keywords: Labor Standards, International Harmonization, Technology Transfer, Oligopoly, Policy Game, Trade Restrictions
JEL Classification: F12, F23