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Globalization and the decline in labor shares: Exploring the relationship beyond trade and financial flows

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  • Young, Andrew T.
  • Tackett, Maria Y.

Abstract

We employ data from up to 125 countries during the 1970–2009 period to explore the relationship between globalization and labor share. Existing studies report a negative relationship between trade and investment flows and labor shares. While we also find that economic flows are often negatively related to labor shares, measures of social globalization tend to be positively related to labor shares. While greater mobility of goods and capital may be associated with increases in capital's bargaining power, all else equal, greater flows of information, ideas, and people may increase the bargaining power of workers.

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  • Young, Andrew T. & Tackett, Maria Y., 2018. "Globalization and the decline in labor shares: Exploring the relationship beyond trade and financial flows," European Journal of Political Economy, Elsevier, vol. 52(C), pages 18-35.
    • Handle: RePEc:eee:poleco:v:52:y:2018:i:c:p:18-35
    DOI: 10.1016/j.ejpoleco.2017.04.003
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    3. Ha, Le Thanh & Dung, Hoang Phuong & Thanh, To Trung, 2021. "Economic complexity and shadow economy: A multi-dimensional analysis," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 408-422.
    4. Michael MITSOPOULOS & Theodore PELAGIDIS, 2021. "Labor Taxation And Investment In Developed Countries. The Impact On Employment," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 13-31, June.
    5. González-Rozada, Martín & Ruffo, Hernán, 2024. "Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries," World Development, Elsevier, vol. 177(C).
    6. Zuazu, Izaskun, 2019. "The growth effect of democracy and technology: An industry disaggregated approach," European Journal of Political Economy, Elsevier, vol. 56(C), pages 115-131.
    7. Tushar Bharati & Mohammad Farhad & Michael Jetter, 2023. "On the relationship between trade openness and government size," The World Economy, Wiley Blackwell, vol. 46(7), pages 2102-2133, July.
    8. Isaac Ketu & Arsene Mouongue Kelly & Jules-Eric Tchapchet Tchouto, 2024. "Does economic complexity reduce the size of the shadow economy in African countries?," SN Business & Economics, Springer, vol. 4(1), pages 1-27, January.
    9. Roya Taherifar & Mark J. Holmes & Gazi M. Hassan, 2023. "The drivers of labour share and impact on pay inequality: A firm-level investigation," Working Papers in Economics 23/03, University of Waikato.
    10. Arif, Imran, 2021. "Productive knowledge, economic sophistication, and labor share," World Development, Elsevier, vol. 139(C).
    11. Francesco Bloise & Irene Brunetti & Valeria Cirillo, 2022. "Firm strategies and distributional dynamics: labour share in Italian medium-large firms," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(2), pages 623-655, July.
    12. Bruno Bises & Francesco Bloise & Antonio Scialà, 2024. "Labor share as an "automatic stabilizer" of income inequality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 511-532, April.
    13. Kim, Dong-Hyeon & Lin, Shu-Chin, 2023. "Income inequality, inflation and financial development," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 468-487.
    14. Taras Vasyltsiv & Ruslan Lupak & Marta Kunytska-Iliash, 2019. "Social Security Of Ukraine And The Eu: Aspects Of Convergence And Improvement Of Migration Policy," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 5(4).
    15. Quang Hoan Truong & Van Chung Dong, 2023. "Impacts of FDI Presence and Product Sophistication on the Demand for Skilled and Unskilled Labour: Evidence from SMEs in Viet Nam," Working Papers DP-2022-40, Economic Research Institute for ASEAN and East Asia (ERIA).
    16. Onur Özdemir, 2020. "The handicap for enhanced solidarity across advanced economies: The greater the economic openness higher the unequal distribution of income," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(4), pages 585-632, December.
    17. Mary O’Mahony & Michela Vecchi & Francesco Venturini, 2021. "Capital Heterogeneity and the Decline of the Labour Share," Economica, London School of Economics and Political Science, vol. 88(350), pages 271-296, April.
    18. Taining Wang & Jinjing Tian, 2020. "Recasting the trade impact on labor share: a fixed-effect semiparametric estimation study," Empirical Economics, Springer, vol. 58(5), pages 2465-2511, May.
    19. Arif, Imran & Hall, Joshua C., 2019. "International flows of people and institutional change," European Journal of Political Economy, Elsevier, vol. 58(C), pages 276-288.
    20. Amendola, Marco & Ciampa, Valerio & Germani, Lorenzo, 2024. "The distributional effects of labour market deregulation: Wage share and fixed-term contracts," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 328-338.
    21. Mary O'Mahony & Michela Vecchi & Francesco Venturini, 2019. "Technology, Intangible Assets and the Decline of the Labor Share," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2019-17, Economic Statistics Centre of Excellence (ESCoE).

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    More about this item

    Keywords

    O50; O15; J61; labor share; capital share; globalization; functional distribution of income;
    All these keywords.

    JEL classification:

    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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