Multinational Enforcement of Labor Law: Experimental Evidence from Bangladesh's Apparel Sector

Working Paper
Published on 8 October 2019
Authors
Laura Boudreau

Abstract

Western stakeholders are increasingly demanding that multinationals sourcing from developing countries be accountable for labor rights and 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 unkown. Boudreau (2019) partnered with a set of multinational retail and apparel firms to enforce local labor laws on their suppliers in Bangladesh. The author implemented a randomized controlled trial with 84 Bangladeshi garment factories, randomly enforcing a mandate for worker-manager safety committees in 41 supplier establishments. The intervention significantly improves compliance with the labor law. It also has a small, positive effect on indicators of safety committees' effectiveness, including measures of physicial safety and awareness. These improvements do not appear to come at significant costs to suppliers in terms of efficiency. Factories with better managerial practices drive these improvements. In contrast, factories with poor managerial practices do not improve compliance or safety, and in these factories, workers' job satisfaction declines.

Authors

Laura Boudreau

University of California, Berkeley