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Wage share, globalization and crisis: the case of the manufacturing industry in Korea, Mexico and Turkey

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Author Info
Ozlem Onaran

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Abstract

The aim of this paper is to analyze the changes in the wage share in the manufacturing industry in Mexico, Turkey and Korea in the era of globalization. The focus is on the one hand on the effects of globalization on the wage share, which is measured by the effects of international trade and FDI intensity of the economy. On the other hand, the process of opening up has been accompanied by major currency crises in most developing countries in the last decade, which has affected the wage share through exchange rate depreciation and economic recession. The paper develops a Post-Keynesian conflicting claims model for an open economy under the pressure of globalization, and an equation for the wage share is estimated for each country using the Seemingly Unrelated Regression method. The results show that both recessions and nominal depreciations have a clear and lasting negative effect on the manufacturing wage share in all countries, whereas the effect of openness, in particular international trade depends on industrial policy structure. Increased export intensity leads to a decline in the manufacturing wage share in Turkey and Mexico, but has no significant effect in Korea. The positive expectations from FDI are also not materialized in any of the three countries.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 23 (2009)
Issue (Month): 2 ()
Pages: 113-134
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Handle: RePEc:taf:irapec:v:23:y:2009:i:2:p:113-134

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Related research
Keywords: labor's share; developing countries; trade; FDI; crisis;

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References listed on IDEAS
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  1. Milner, Chris & Wright, Peter, 1998. "Modelling Labour Market Adjustment to Trade Liberalisation in an Industrialising Economy," Economic Journal, Royal Economic Society, vol. 108(447), pages 509-28, March. [Downloadable!] (restricted)
  2. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Rowthorn, R E, 1977. "Conflict, Inflation and Money," Cambridge Journal of Economics, Oxford University Press, vol. 1(3), pages 215-39, September.
  4. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages F22-F49, 02. [Downloadable!] (restricted)
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This page was last updated on 2009-12-10.

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