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Leftist governments tend to tax corporations heavily. However, they are unable to do so all the time. In this study, I posit that whether leftist governments can enact this preferred tax policy is conditional on the policy environment. When leftist governments are pressured by their economic competitors to reduce labor rights protection, instead of giving in, they choose to cut corporate tax rates, because the former is more politically harmful than the latter, and the latter is equally effective in achieving the policy goal the former is intended to accomplish. Using novel global data on labor rights from 1994 to 2012 and the structural equivalence technique to capture the policy pressure to restrict labor rights, I find robust evidence for the argument. This finding suggests that facing globalized economic competition, leftist governments make strategic compromise by adopting market-oriented policies in issue areas that deviate from their desirable ideological positions but are less costly than simply yielding to the pressure to alter policies in those issue areas that directly hurt their core constituencies.

AbstractStates can seemingly defy the dictates of globalization. In practice, although being pressured by their competitors, states rarely engage in the race to the bottom by downgrading labor rights laws that are politically costly to pursue. I argue that states' resistance is made possible by adopting more viable policy alternatives, i.e., concluding preferential trade agreements (PTAs). PTAs can generate considerable economic gains in a less politically costly way than does reducing legal labor protection. As a result, it is expected that a pair of states is more likely to form a PTA in the face of policy pressure to lower legal labor protection. I also argue that facing such pressure, these states are more likely to include strong labor provisions in PTAs. Finally, in the face of the policy pressure, states may feel that signing a PTA is a bit less urgent when they are able to diminish practical labor protection. Applying structural equivalence technique to a new global labor rights dataset to capture the policy pressure to lower legal labor protection, I find robust evidence in support of these conjectures.

The extant literature views the decision to protect women's economic rights as made by firms and neglects the role of the state. This study argues that states are pressured to improve the protection of these rights by enacting gender parity–promoting policies in response to similar policy choices by their economic competitors, resulting in a specific type of policy interdependence—the upward policy convergence. Additionally, this convergence should be stronger in laws than in practices because some states continue to benefit from women-suppressing policies, and because improving laws is less costly than improving policy implementation. Using newly coded global data from 1999 to 2009 on women's economic rights that distinguish between laws and practices, spatial econometrical analyses support these conjectures. Essentially, this study shows that the race to the bottom is not the sole consequence of globalization, a climb to the top is possible as well when we look closer and more carefully. In other words, trade and capital dependence can generate positive policy gains too.

In this study, I examine how domestic regimes mitigate pressure from economically competing states to reduce the protection of labor rights. I argue that democratic states provide higher protection and are more resistant to this downward policy pressure for two main reasons. Directly, democracy empowers workers through freedom of association and enfranchisement. Indirectly, democracy offers better protection of property rights, which lessens the need to use labor rights as an economic incentive. I also argue that this resistance to the downward pressure is more pronounced in practice than in law. These expectations are supported through spatial analyses of a new global dataset on association and collective-bargaining rights for the period 1994–2012. The results remain robust to alternative measures of labor rights, different model specifications, and various econometric estimators.