Globalization and the Quality of Asian and Non-Asian Jobs

Abstract

This paper assesses the impact of international trade and investment flows on the evolution of working conditions and labor rights in Asian and non-Asian countries in the late 20th and early 21st centuries. Labor conditions improved as globalization increased during this period. We find that real per capita income growth remains a powerful source of improved labor conditions, and the effect of trade on working conditions is mainly indirect through its impact on per capita gross domestic product (GDP). We find no evidence that eliminating trade barriers degrades labor conditions. We do find evidence that persistent differences in labor conditions between Asia and the rest of the world can be explained by differences in growth and international trade. Finally, we find no evidence that countries with poor labor conditions attract disproportionate flows of foreign direct investment (FDI). Instead, FDI flows seem mainly influenced by considerations of market size, investment risks, and the share of trade in GDP. After holding those influences constant, Asia receives a comparatively small share of world FDI inflows.