International Trade and Forced Labor

Abstract

We explore the link between trade liberalization and forced labor theoretically and empirically. Our theoretical framework predicts that the net effect of trade on the use of forced labor depends on which sectors improve their relative terms of trade and if openness to trade triggers anti-forced labor policies in the country or by trade partners. Using two datasets, we show that trade openness increases the intensive margin of forced labor but not the extensive margin. Splitting trade partners by labor standards, we show that trade with high-standard countries reduces both margins, whereas trade with low-standard countries raises the intensive margin.