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Challenges to GlobalizationAnalyzing the Economics$
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Robert E. Baldwin and L. Winters

Print publication date: 2004

Print ISBN-13: 9780226036151

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226036557.001.0001

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The Effects of Multinational Production on Wages and Working Conditions in Developing Countries

The Effects of Multinational Production on Wages and Working Conditions in Developing Countries

(p.279) 8 The Effects of Multinational Production on Wages and Working Conditions in Developing Countries
Challenges to Globalization

Drusilla K. Brown

Alan V. Deardorff

Robert M. Stern

University of Chicago Press

This chapter assesses the empirical evidence on the effects of multinational production on wages and working conditions in developing countries. It is motivated by the controversies that have emerged, especially in the past decade or so, concerning whether or not multinational firms in developing countries are exploiting their workers with “sweatshop” conditions—that is, paying low wages and subjecting them to coercive, abusive, unhealthy, and unsafe conditions in the workplace. The chapter is organized as follows. Section 8.2 addresses these controversies in the context of the efforts and programs of social activist groups and universities and colleges involved in the anti-sweatshop campaign in the United States, and the related issues of the social accountability of multinational firms and the role of such international institutions as the International Labor Organization and World Trade Organization in dealing with labor standards and trade. Section 8.3 presents a conceptual treatment of the effects of foreign direct investment (FDI) on wages in host countries and the effects of outsourcing and subcontracting by multinational firms. Section 8.4 reviews empirical evidence on multinational-firm wages in developing countries together with evidence on the relationship between FDI and labor rights, and Section 8.5 concludes. A commentary is also included at the end of the chapter.

Keywords:   multinational companies, labor exploitation, sweatshops, social accountability, labor standards, foreign direct investment, outsourcing, subcontracting

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