Core Labor Standards and Development: Impact on Long-Term Income RE ´ MI BAZILLIER * Universite ´ Paris 1 Panthe ´on Sorbonne – CNRS, France Summary. — The paper focuses on the impact of international core labor standards on long-term per capita income. In order to do that, it is necessary to build a new synthetic indicator of labor standards using multiple correspondence analysis, measuring the four core labor standards recog- nized by ILO. We propose an estimation of the steady-state per capita income for a large panel of countries (104) and then that of developing countries. The two-stage least square method is used to correct potential problems of endogeneity. The findings show that, by and large, countries with higher labor standards have a higher steady-state level. Ó 2007 Elsevier Ltd. All rights reserved. Key words — growth, labor standards, data analysis 1. INTRODUCTION Labor Standards are by no means a new is- sue. We have seen demand for labor standards rise with the globalization process. Many devel- oped countries and workers unions are demanding a social clause in international trade; the idea behind this proposition being that international trade exerts a downward pressure on labor standards in developed coun- tries and constitutes an ‘‘unfair’’ competitive advantage for developing countries. From this perspective, international coordination should be more efficient in order to achieve trade liber- alization and strengthening of labor standards (Beaulieu & Gaisford, 2002). Bagwell and Stai- ger (2000) argue that international negotiations on tariffs alone would lead to a globally ineffi- cient outcome characterized by partial liberal- ization and a lowering of labor standards. They suggest that different approaches of mul- tilateral negotiations could allow governments to reach a globally efficient outcome in terms of trade liberalization and strengthening of la- bor standards. Until now, the debate has focused largely on the link between labor standards and interna- tional trade. However, this approach has its limitations. In the first instance, many develop- ing countries are completely against any kind of links between international trade and labor standards, for fear of a ‘‘hidden protection- ism.’’ Furthermore, trade sanctions can be counter-productive because they harm the peo- ple they are designed to help (Brown, 2000; Brown, Deardorff, & Stern, 1996; Maskus, 1997; Srinivasan, 2004). Many authors (Com- mittee for Economic Development, 2001; Gris- wold, 2001) argue that the best way to improve labor standards is to achieve trade liberaliza- tion (arguments for the endogeneity of labor standards). Yet we might suggest that it is insufficient to study the whole phenomena exclusively from the point of view of the link with international trade, as it is often the case that countries with very weak labor standards are not integrated into international trading. Moreover, the export sectors have very often better standards than the others (Brown, Dear- dorff, & Stern, 2003). The focus of this paper is on the link between labor standards and long-term per capita * I am very grateful to Jean-Louis Arcand (CERDI-CNRS) for the very helpful comments he made on a previous version of this paper. I also want to thank Paul Gyselinck (CERDI), Ariane Tichit (ENS-LHS), and Jean-Claude Berthelemy (CES-CNRS) for their advice, and Nicolas Sirven (Capability and Sustainabil- ity Centre, University of Cambridge) for his help. Final revision accepted: February 26, 2007. World Development Vol. 36, No. 1, pp. 17–38, 2008 Ó 2007 Elsevier Ltd. All rights reserved 0305-750X/$ - see front matter doi:10.1016/j.worlddev.2007.02.010 www.elsevier.com/locate/worlddev 17