Dynamic labor standards under international oligopoly

Yunfang Hu, Laixun Zhao

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    This chapter models productive labor standards (LS) in a two-stage, two-period model of international oligopoly, where a home government chooses subsidies on LS and output first, and oligopolistic firms determine productions of LS and output later. We show that the optimal LS maintained is higher in a dynamic setup (i.e., across periods) than in a static setup (or when firms behave myopically). Thus, even in poor countries, it benefits to maintain a certain level of LS. A minimum international LS directly affecting only the less efficient firm may lower the profits of the rival firm also. With inter-temporal LS carryovers, first-period optimal subsidies are more efficient on LS than on output. If the home government cares about LS (or human rights) in the foreign country, then it is better not to provide home subsidies, because such subsidies reduce foreign LS.

    Original languageEnglish
    Title of host publicationInternational Trade and Economic Dynamics
    Subtitle of host publicationEssays in Memory of Koji Shimomura
    PublisherSpringer Berlin Heidelberg
    Pages217-237
    Number of pages21
    ISBN (Print)9783540786757
    DOIs
    Publication statusPublished - 2009 Dec 1

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)
    • Business, Management and Accounting(all)

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