The newest issue of the American Political Science Review includes an article by UNC's own Layna Mosley (with Brian Greenhill and Aseem Prakash), "Trade-based Diffusion of Labor Rights: A Panel Study, 1986-2002." An ungated version is here. The article argues that there is a "California Effect" for labor rights that is somewhat similar to the effect on environmental policy. The abstract:
This article investigates the nature of the linkages between trade and labor rights in developing countries. Specifically, we hypothesize that a serves to transmit superior labor standards from importing to exporting countries, in a manner similar to the transmission of environmental standards. We maintain that, all else being equal, the labor standards of a given country are influenced not by its overall level of trade openness, but by the labor standards of its trading partners. We evaluate our hypothesis using a panel of 90 developing countries over the period 1986-2002, and we separately examine the extent to which the labor laws and the actual labor practices of the countries are influenced by those of their export destinations. We find that strong legal protections of collective labor rights in a country's export destinations are associated with more stringent labor laws in the exporting country. This California effect finding is, however, weaker in the context of labor rights practices, highlighting the importance of distinguishing between formal legislation and actual implementation of labor rights.
One question is whether the divergence between law and practice narrows over time. The study gives some evidence for that: all the signs are positive, and the third-year lag for the effect of bilateral trade context on practices is statistically significant even though the effect is insignificant at lags 1 and 2. Clearly, more work is necessary, and longer time horizons may be needed to truly observe any "reverse decay" effects of law on practice. If such are effects are found, it may provide evidence that including labor standards in trade agreements can have a positive effect.
Either way, this study strikes another tentative blow against "race to the bottom" arguments.