https://macropaperwarehouse.com/authors/john-mclaren/John McLarenHugo -- gohugo.ioen-usThu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/global-value-chains-and-labour-standards-the-race-to-the-bottom-problem/Thu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/global-value-chains-and-labour-standards-the-race-to-the-bottom-problem/<p>Im and McLaren (2025) ask whether globalization induces governments to weaken labor standards for workers — the so-called &ldquo;race to the bottom&rdquo; (RTB) hypothesis. The question has high stakes: advocates point to events such as the 1,136-worker Rana Plaza factory collapse in Bangladesh (2013) and to India&rsquo;s deregulation campaign after 2014 (associated with approximately 6,500 workplace deaths in 2015–2020) as evidence that competition for global capital systematically erodes safety and working conditions. The paper builds a stylized many-country equilibrium model of labor-market integration adapted from the Grossman and Rossi-Hansberg (2008) tasks framework. Output requires a continuum of tasks z in [0,1], performable in any of N countries; labor requirements per task follow a Weibull distribution (shape parameter nu &gt; 0), independently across tasks and countries. Working conditions (kappa_i) enter the cost function multiplicatively — better conditions reduce worker productivity at the relevant margin. Utility is separable in wages and conditions with both components strictly concave, and Assumption 1 (x<em>xi&rsquo;(x) and x</em>mu&rsquo;(x) strictly decreasing) ensures conditions are normal goods and second-order conditions hold. The unregulated equilibrium task allocation is equivalent to CES cost minimization with elasticity of substitution 1/(1-rho) &gt; 1, rho = nu/(1+nu). Governments set minimum standards non-cooperatively in Nash equilibrium.</p>