Patient Zero: unintended consequences and infectious upgrading : the effect of outward investment linkages with Europe on decent working conditions in Brazil - PhDData

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Patient Zero: unintended consequences and infectious upgrading : the effect of outward investment linkages with Europe on decent working conditions in Brazil

The thesis was published by Wagner, Patrick James, in September 2022, University of Bern.


Over the last two decades there has been a major shift in the global political economy. In that time, the BRICs asserted themselves as champions and drivers of global economic integration. But what does this new found political economic prominence mean for workers and working conditions in developing countries? While there is already a sizable body of research on the impact of trade and North to South investment flows on labor standards, the greatly increased flow of South to North outward investments and its effect on working conditions in the investing countries remains understudied. Globalization pessimists would contend that this new phase of international economic integration would harm workers as it decreases their overall bargaining power in home countries and brings low road practices to relatively high-standard Northern markets. More optimistic accounts might predict there is the possibility of a net gain for workers, as increasing exposure to high road labor practices and stakeholder monitoring in developed countries drive upgrading of practices in emerging market multinationals (EMNEs). This thesis, as part of the BRICS Globalization Project, investigates for the first time whether South to North investments are associated with improving or degrading conditions for home-country workers.

In doing so, I propose an \investing-up” effect whereby high standard working conditions diffuse back from European hosts to developing country locations, driven by compliance and standardization effects. To test this proposition, I construct a novel database that draws on numerous governmental, academic, and private sector data sources and which maps outward investment linkages with Europe and decent working conditions by economic sector in Brazil’s 27 states and 5,563 municipalities. Using this novel data, this thesis tests whether direct investment in Europe by Brazilian companies leads to the introduction of decent working conditions between the years 2000 and 2015 and further explores how these practices spread within sectors and between municipalities in Brazil in the post-investment period. The empirical results provide strong support for the investing-up effect across a range of decent working conditions and for subsequent diffusion between Brazilian municipalities and states using a mixture of panel data analysis and spatial econometrics. Moreover, I supplement the econometric results with text analysis of thousands of union and employer organization press releases and blog posts. Using sentiment analysis and topic modeling the objective econometric results are bolstered by a study of the subjective experience of Brazilian workers as communicated through their representatives associated with the outwardly invested Brazilian multinationals in the pre- and post-investment periods. The text data is also leveraged to provide qualitative evidence for the causal mechanisms proposed in the theory. Overall, the results suggest that economic integration with high-standard developed countries can act as a powerful mechanism for labor standard improvements and more equitable development in developing countries.

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