Revenue Substitution? How Foreign Aid Inflows Moderate the Effect of Bilateral Trade Pressures on Labor Rights

Sijeong Lim, Layna Mosley, Aseem Prakash

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

This paper investigates how foreign aid inflows moderate bilateral trade-based pressures on the exporting countries' labor rights. Because aid provides additional resources to recipient governments, it reduces the importance aid-recipient governments attach to the preferences of their export partners. Consequently, aid inadvertently moderates the leverage exercised by importing countries on the governments of exporting, developing countries. Our analysis of a panel of 91 aid recipient countries for the period 1985-2002 lends support to the "revenue substitution" hypothesis. When aid levels are low, bilateral trade-based pressures are associated with improved labor rights. As aid levels rise, however, the effect loses significance.

Original languageEnglish
Pages (from-to)295-309
Number of pages15
JournalWorld Development
Volume67
DOIs
Publication statusPublished - 2015 Mar 1
Externally publishedYes

Keywords

  • Foreign aid
  • Labor rights
  • Race-to-the-bottom
  • Revenue substitution
  • Trade

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Sociology and Political Science
  • Economics and Econometrics

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