Can multinational buyers provide their suppliers in developing countries with incentives to comply with local labour laws?
Some multinationals privately enforce labour standards among their suppliers in developing countries. But is this effective, and does it complement or replace other ways to improve working conditions? Laura Boudreau discusses a recent randomised controlled trial she conducted in Bangladesh to test whether multinational buyers can provide their suppliers in developing countries with incentives to improve compliance with local labour laws. Her experiment exploited a programme by the Alliance for Bangladesh Worker Safety, a coalition of US multinationals, to enforce a new mandate by the Bangladeshi government requiring factories to establish worker-manager health and safety committees. The intervention by the Alliance significantly improved compliance by local suppliers with the new labour law, which in turn led to a small but statistically significant improvement in indicators of factory safety.
Editors' note: This research is part of CEPR and DFID's Private Enterprise Development in Low Income Countries (PEDL) initiative.