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Globalization and the Labor Share in National Income

Author

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  • Doan, Ha Thi Thanh

    (Asian Development Bank Institute)

  • Wan, Guanghua

    (Asian Development Bank Institute)

Abstract

Contradicting the conventional wisdom of constant factor shares, the portion of national income accruing to labor has been trending downward in the last three decades. This decline must have contributed to rising inequality as labor income is more evenly distributed than capital income. This study contributes to the literature on income inequality by exploring the role of globalization in driving the labor share. In particular, we focus on the impacts of trade openness and foreign direct investments (FDI) on the labor share. Using country-level panel data for 1980–2010, the study finds that trade is a significant and robust determinant of labor share. Generally speaking, export depresses while import increases the labor share. The impact of FDI, however, is insignificant. These results are similar for both developed and developing countries.

Suggested Citation

  • Doan, Ha Thi Thanh & Wan, Guanghua, 2017. "Globalization and the Labor Share in National Income," ADBI Working Papers 639, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0639
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    labor share; wage share; globalization; imports; exports; FDI;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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