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Globalization, Creative Destruction, and Labor Share Change: Evidence on the Determinants and Mechanism from Longitudinal Plant-level Data

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  • Maliranta, Mika
  • Böckerman, Petri

Abstract

We examine the sources and micro-level mechanisms of the changes in the labor share of value added. We link the micro-level dynamics of the labor share change with that of productivity and wage growth. Using a useful variant of the decomposition method we make a distinction between the change in the average plant and the micro-level restructuring. With Finnish plant-level data covering three decades we show that micro-level restructuring is the link between the declining labor share and increasing productivity in 12 manufacturing industries of four regions, and that increased international trade is a factor underlying those shifts.

Suggested Citation

  • Maliranta, Mika & Böckerman, Petri, 2009. "Globalization, Creative Destruction, and Labor Share Change: Evidence on the Determinants and Mechanism from Longitudinal Plant-level Data," Discussion Papers 1178, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:dpaper:1178
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    Keywords

    globalization; international trade; foreign ownership; micro-level restructuring; labor share;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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