Harrison, Ann (2005): Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence.
Download (456kB) | Preview
In recent years, economists and other social scientists have devoted extensive research efforts to understanding the widening wage gap between high-skill and low-skill workers. This paper focuses on a slightly different question: how has globalization affected the relative share of income going to capital and labor? Using a panel of over one hundred countries, this paper analyses trends in labor shares and examines the relationship between shares and measures of globalization. Contrary to recent literature, the evidence suggests that labor shares are not constant over time. Over the 1960 to 2000 period, labor shares in poor countries fell, while shares in rich countries rose. These changes in labor shares are driven by changes in factor endowments and government spending, as well as by traditional measures of globalization, such as trade shares, exchange rate crises, movements in foreign investment, and capital controls. In particular, the results suggest that rising trade shares and exchange rate crises reduce labor’s share, while increasing capital intensity, capital controls and government spending increase labor’s share.
|Item Type:||MPRA Paper|
|Original Title:||Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence|
|Keywords:||labor share; globalization; inequality|
|Subjects:||F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity
|Depositing User:||Ann E. Harrison|
|Date Deposited:||25. Jun 2012 18:50|
|Last Modified:||12. Feb 2013 01:49|
Blanchard, Olivier, “The Medium Term”, Brookings Papers on Economic Activity, 2:1997. 31
Borjas, George J. and Valerie A. Ramey, “Foreign Competition, Market Power, and Wage Inequality”, The Quarterly Journal of Economics, November 1995.
F. Bourguignon and C. Morrisson, “Income Distribution, Development and Foreign Trade: A Cross- Sectional Analysis”, European Economic Review 34 (1990), 1113-1132.
Diwan, Ishac, “Labor Shares and Financial Crises”, Mimeo, November 1999, The World Bank.
Avinash Dixit and Victor Norman, Theory of International Trade, Nisbet and Cambridge University Press, 1984.
Douglas Gollin, “Getting Income Shares Right”, Journal of Political Economy, Number 2, Volume 110, April 2002.
Harrigan, James and Rita Balaban, “U.S. Wages in General Equilibrium: Estimating the Effects of Trade, Technology and Factor Supplies, 1963-1991", Mimeo, September 1997.
Krueger, Alan, “Measuring Labor’s Share”, NBER Working Paper Number 7006, March 1999.
Nehru, Vikram and Ashok Dhareshwar, “A New Database on Physical Capital Stocks: Sources, Methodology, and Results”, mimeo, World Bank, 1993.
Poterba, James, “Recent Developments in Corporate Profitability: Patterns and Explanations”, Mimeo, March 1997.
Richardson, J. David and Elena B. Khripounova, “U.S. Labor Market Power and Linkages to International Trade: Indentifying Suspects and Measures”, Draft for U.S. Department of Labor, 1998.
Rodrik, Dani, Has Globalization Gone Too Far?, Institute for International Economics, Washington, D.C., March 1997.
Slaughter, Matthew, “International Trade and Labor-Demand Elasticities”, Journal of International Economics, June 2001.