Core Labor Standards and Competitiveness: Implications for Global Trade Policy

One of the principal arguments for inclusion of core labor standards in the WTO is that weak labor standards provide an illegitimate boost to competitiveness and may result in a "race to the bottom" in labor standards worldwide. This paper shows that, if the violation of labor standards results from discrimination against particular workers in export industries, employment, output, and competitiveness will be reduced since employment is determined by the short side of the market. If the problems arise from abuse of market power by employers, competitiveness will be similarly reduced. Only if freedom of association and collective bargaining were intended to allow workers in some sectors to restrict output and drive up wages would the absence of these standards raise competitiveness. However, if product markets are competitive, it is likely that association rights would increase output and competitiveness by raising productivity. The competitiveness argument seems either to reflect analytical confusion or to represent a cover for protectionist interests.     

An examination of the relation between market structure and the profitability of audit engagements

Due to increasing supplier concentration, there is growing concern regarding the lack of competition in the audit market. Theory based on Cournot oligopoly predicts that increasing concentration will facilitate monopolistic behaviour. Conversely, if the market for audit services has more in common with a Bertrand oligopoly, concentration may not lead to higher fees. We evaluate whether increased audit supplier concentration leads to economic rents by investigating audit profitability. Using proprietary data from a (then) Big 6 audit firm, we find that local market structure has a significant and positive association with audit profitability, but not auditor effort for large clients.     

Market Effects of Voluntary Climate Action by Firms: Evidence from the Chicago Climate Exchange

Are private voluntary environmental actions by firms a sign of mismanagement, or a profitable “win-win” replacement for regulation? Empirical evidence is decidedly mixed. In this study, we use 19 years of monthly stock price returns, from 1991 to 2009, to examine the profitability of participation in CCX, a large voluntary greenhouse gas mitigation program. After controlling for systemic market risk as well as industry-specific shocks, we find statistically significant and positive excess returns for firms that announce their decision to join CCX. In addition, the progress of proposed greenhouse gas legislation (the Waxman–Markey bill) had a positive and large impact on excess returns for CCX member firms, suggesting that a major incentive for firms to join CCX may be to prepare for future regulation. Marginal abatement costs (proxied by the carbon price), on the other hand, were unrelated to excess returns. Our results imply that voluntary approaches should play a role in combating climate change, but that relying on them alone is not enough.     

Trade Impacts of China's World Trade Organization Accession

This study examines China's World Trade Organization (WTO) accession commitments and assesses their implications for China and the world using a model reflecting the importance of duty-free intermediate inputs in China's exports. The WTO agreement built on earlier reforms that introduced competition into the trade regime, eliminated nontariff barriers and exchange rate overvaluation, and reduced tariffs. The reforms associated with accession were conservatively estimated to increase global real incomes by $74 billion per year, with $29 billion accruing to China and the remainder primarily to those countries trading directly with China. Some lower-income developing countries faced greater competition from China in third markets.