Globalisation, EU enlargement and income distribution
AbstractAdvanced industrial countries have been exhibiting a steady decline of the labour income shares in the last two decades. We explain this phenomenon by resorting to the old Stolper-Samuelson theorem. The conclusions concerning the impact of free trade on the income distribution are unambiguous in a Heckscher-Ohlin world with two countries, two goods and two factors of production (capital and labour). In contrast, the consequences of FDI from the capital abundant country (EU) to the labour abundant CEEC are ambiguous. Both scenarios are investigated theoretically, simulated with a hypothetical two country CGE model, including the EU and the CEEC and then tested empirically. Accordingly, globalisation has contributed to a decline in the labour income shares in the EU and an increase in the CEEC. Additionally, those EU countries which are engaged more in trade with the CEEC ('mini-globalisation' in Europe) can expect a sharper decline in the wage share.
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Bibliographic InfoArticle provided by Inderscience Enterprises Ltd in its journal Int. J. of Public Policy.
Volume (Year): 6 (2010)
Issue (Month): 1/2 ()
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Web page: http://www.inderscience.com/browse/index.php?journalID=97
globalisation; EU enlargement; income distribution; European Union; free trade; FDI; foreign direct investment; CEEC; simulation; modelling; labour income shares; Central and Eastern European countries.;
Other versions of this item:
- Fritz Breuss, 2007. "Globalization, EU Enlargement and Income Distribution," WIFO Working Papers 296, WIFO.
- Fritz Breuss, 2007. "Globalization, EU Enlargement and Income Distribution," FIW Working Paper series 008, FIW.
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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