The Race to the Bottom, From the Bottom
Chau, Nancy H.; Kanbur, Ravi
The dominant perspective in discussions of labor and environmental standards and globalization is that of North-South competition and its impact on Northern standards. This paper presents an alternative perspective, that of South-South competition to export to the North, and its impact on Southern standards. It develops a simple model of Southern competition on standards, which can begin to provide insights into some key questions. A Southern race to the bottom is possible but not inevitable. It depends intricately on the Northern demand curve, the size of big exporters relative to each other, and the relative size of the competitive fringe of small exporters--a precise and complete characterization is developed in the paper. The paper also analyzes the effect of Northern tariffs on Southern strategic competition in standards. It is shown that Northern trade protectionism undermines Southern standards.
WP 2000-16 November 2000JEL Classification Codes: F16; J38
Charles H. Dyson School of Applied Economics and Management, Cornell University
labor and environmental standards; race to the bottom; strategic complementarity and substitutability; trade restrictions; logconcavity and logconvexity