Abstract

Western stakeholders are increasingly demanding that multinationals sourcing from developing countries be accountable for working conditions upstream in their supply chains. In response, many multinationals privately enforce labor standards in these countries, but the effects of their interventions on local firms and workers are unknown. I partnered with 29 multinational retail and apparel firms to enforce local labor laws on their suppliers in Bangladesh. I implemented a field experiment with 84 garment factories, randomly enforcing a mandate for safety committees. The intervention increases compliance with the law and improves measures of safety. My findings are consistent with a model of imperfect monitoring in which MNCs provide positive penalties for noncompliance. These improvements do not appear to come at significant costs to suppliers in terms of efficiency. Factories with better managerial practices drive the improvements, while those with poor practices do not improve, and in these factories, workers’ job satisfaction declines.

Reference

Laura Boudreau (Columbia University), “Multinational enforcement of labor law: Experimental evidence from Bangladesh's apparel sector”, Behavior, Institutions, and Development Seminar, May 6, 2021, 15:30–16:45, room Zoom.