ABSTRACT
This chapter analyzes policymaking in a context in which international labor standards have become a concern of at least some consumers. It discusses the problem of labor standards from the perspective of consumers and develops, step by step, the consumer flow model. The chapter presents the essential elements of the dynamic structuralist computable general equilibrium model. It describes proposes several simulations are performed, including a tax break for monitoring firms and a wage increase for female workers. Labor standards in developing countries is a highly charged, often emotional issue. Monitoring is equivalent to an “efficiency wage” effect that operates on the demand rather than supply side. The foregoing analysis treats monitoring parametrically, introduced as a shock. A more realistic assumption is that it is a control variable that can be used to maximize profits dynamically. The effect of monitoring is similar to efficiency wages but has a nonlinear relationship to market share.
