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Measuring the effect of globalization on labour demand elasticity: An empirical application to OECD countries

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Author Info
Giovanni S.F. Bruno (Università Bocconi,Istituto di Economia Politica)
Anna M. Falzoni (Università degli Studi di Bergamo)
Rodolfo Helg (LIUC - Università Carlo Cattaneo)

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Abstract

There are various paths through which globalization is channelled to the labour market. One of these is the effect on labour demand elasticity. Trade might induce an increase in this elasticity via a scale effect due to the increased competition on the output market and/or via a substitution effect generated by expanding the firm production possibility set to include additional inputs. The focus of this paper is centred on the latter channel of transmission. A labour demand equation is obtained from the solution of a firm’s cost minimization problem. The impact of globalization on domestic employment is not restricted to a wage elasticity effect, but also allows for a direct effect with globalization acting as a domestic labour demand shifter. A theoretically consistent labour demand is estimated using a industry-year panel from a number of industrialised countries, including major European countries, Japan and the US over the period 1970-96. Overall we find sig-nificant substitution effect of trade on labour demand elasticity only for the U.K. For Italy and France the evidence is mixed. In all remaining countries globalization has not significantly a .ected labour demand elasticity.

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Publisher Info
Paper provided by CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy in its series CESPRI Working Papers with number 153.

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Length: 29 pages
Date of creation: Feb 2004
Date of revision: Feb 2004
Handle: RePEc:cri:cespri:wp153

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Related research
Keywords: Trade; Labor demand.;

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Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paolo Epifani, 2002. "Trade Liberalization, Firm Performance and Labor Market Outcomes in the Developing World What Can We Learn From Micro-Level Data?," CESPRI Working Papers 138, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Feb 2003. [Downloadable!]
    Other versions:
  2. Giovanna Vallanti, 2005. "Capital Mobility and Unemployment Dynamics: Evidence from a Panel of OECD Countries," CEP Discussion Papers dp0684, Centre for Economic Performance, LSE. [Downloadable!]
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