Working Paper No. 39 - How do trade union rights affect trade competitiveness?

The paper uses a bilateral trade gravity model to evaluate the effects of freedom of association and collective bargaining (FACB) rights and democracy on exports, evaluating exports by labour intensity (using several classifications of industries by labour-intensity) for the 1993 to 1999 period. The model includes data for up to 162 countries and employs a number of indicators of FACB rights and democracy, including those constructed by the authors based on the coding of textual sources, the OECD FACB indices, the Freedom House civil liberties and political rights (democracy) indices, and 'residual' versions of these indicators addressing the endogeneity of FACB rights and democracy with respect to trade openness. The paper finds robust relationships between stronger FACB rights and higher total manufacturing exports as well as between stronger democracy and higher total exports, total manufacturing exports and labour-intensive manufacturing exports. The paper finds no robust relationship between FACB rights and labour-intensive manufacturing exports.