Date of Award

5-1-2012

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Lahiri, Sajal

Abstract

This dissertation investigates possible linkages between trade restrictions and workplace safety. Working conditions in a developing country are often kept poor or inhumane for the purpose of low-cost comparative advantage in low-skilled labor-intensive production. Such conditions which may affect international market access and thus trade restrictions within the WTO mandates are imposable. As producers often have higher market power in the low-skilled labor market due to the large supply of labor, e.g., from an influx of illegal immigrants, trade restrictions may be imposed to help influence a country to reinforce working conditions, in compliance with the ILO and/or the country's labor legislation, by raising the injury tax rate and/or level of safety inspection. These instrumental variables affect the producers' economic incentive in such a way that they would include worker welfare from good working conditions in their production function. The investigation starts first in a general equilibrium model with implicit trade sanctions. It then expands to cover the role of a credit market as a support system for effective sanctions in a two-period model in the case of an injury tax rate, a dominant instrumental variable. It also explores spillover effects of trade sanctions in a two-country model with an explicit tariff imposed in a developed country to induce injury tax rate reform in the developing country. The results show that while imposing trade sanctions to influence an injury tax reform to improve working conditions in a developing country may provide positive results if the direct effect of the sanctions is greater than indirect effect, further empirical research to verify its positions may be needed before implementing a trade strategy. The availability of a credit market as a funding resource for such improvement, however, helps produce positive outcomes. While injury tax reform may take time to implement because it is a domestic policy which might be more difficult for an international community to influence, imposing a tariff for such a purpose in a developed country seems more warranted.

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