Is labour the fall guy of a financial-led globalisation? A cross-country inquiry on globalisation, financialisation and employment at the industry level

Financialisation and globalisation have important implications for the functioning of economies and, in particular, for employment. However, their impact on labour market dynamics has not been sufficiently analysed. The aim of this article is to contribute to fill this gap in the literature with a cross-country analysis at the industry level. The authors identify four industry dynamics (Protection, Expansion, Escape from production and Decline with sunk costs) and explore the hypothesis that financialisation is a phenomenon mostly specific to mature developed economies. They provide an econometric analysis at the country and industry level of the relationship between globalisation, financialisation and employment over the period 1995–2009. They estimate a standard labour demand function in which they introduce financialisation as a demand shifter. They also propose a simple model to explain the financialisation phenomenon and provide a regression testing its prevalence, including regressions with an interaction term between offshoring and financialisation. Their result does not point out to a financial-led globalisation but shows that labour is impacted negatively through the financialisation observed in certain industries. Copyright Kiel Institute 2015