Do transnational corporations care about labour standards?

This paper explores the relationship between foreign direct investment, or the activities of transnational corporations, and core labour standards. It discusses the channels through which labour standards may influence foreign direct investment and presents the results of an empirical test of that linkage. The results show that, contrary to the conventional wisdom that transnational corporations engage predominately in countries with low standards, higher labour standards are positively associated with foreign direct investment inflows. Concerns about „social dumping“ or „a race to the bottom“ on such standards appear to be mistaken. This result even holds for poor developing countries.