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Effects of Globalizationon Labor's Share in National Income

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  • Anastasia Guscina
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    Abstract

    The past two decades have seen a decline in labor''s share of national income in several industrial countries. This paper analyzes the role of three factors in explaining movements in labor''s share--factor-biased technological progress, openness to trade, and changes in employment protection--using a panel of 18 industrial countries over 1960-2000. Since most studies suggest that globalization and rapid technological progress (associated with accelerated information technology development) began in the mid-1980s, the sample is split in 1985 into preglobalization/pre-IT revolution and postglobalization/post-IT revolution eras. The results suggest that the decline in labor''s share during the past few decades in the OECD member countries may have been largely an equilibrium, rather than a cyclical, phenomenon, as the distribution of national income between labor and capital adjusted to capital-augmenting technological progress and a more globalized world economy.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/294.

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    Length: 33
    Date of creation: 01 Dec 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/294

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    Keywords: Productivity; Trade; National income; Labor productivity; Trade policy; employment; employment protection; employment share; labor share; bargaining power; skilled workers; labor shares; employment income; self-employment; self-employment income; employment shares; job creation; employment protection policies; unemployment; labor market; labor adjustment costs; labor union; unemployment insurance; labor compensation; total employment; unemployment rate; effects on employment; labour; labor adjustment; jobs; labour share;

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    1. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 3(1), pages 1-33, October.
    2. Daron Acemoglu, 2000. "Labor- and Capital- Augmenting Technical Change," NBER Working Papers 7544, National Bureau of Economic Research, Inc.
    3. Emma Aisbett, 2005. "Why are the Critics so Convinced that Globalization is Bad for the Poor?," NBER Working Papers 11066, National Bureau of Economic Research, Inc.
    4. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
    5. Minsik Choi, 2001. "Threat Effect of Foreign Direct Investment on Labor Union Wage Premium," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp27, Political Economy Research Institute, University of Massachusetts at Amherst.
    6. Alan V. Deardorff, 2002. "What Might Globalization's Critics Believe?," Working Papers, Research Seminar in International Economics, University of Michigan 492, Research Seminar in International Economics, University of Michigan.
    7. repec:fth:bfdipa:10/2001 is not listed on IDEAS
    8. Ripatti, Antti & Vilmunen, Jouko, 2001. "Declining labour share – Evidence of a change in underlying production technology?," Research Discussion Papers, Bank of Finland 10/2001, Bank of Finland.
    9. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 57, July.
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    Cited by:
    1. Azmat, Ghazala & Manning, Alan & Van Reenen, John, 2007. "Privatization, Entry Regulation and the Decline of Labour's Share of GDP: A Cross-Country Analysis of the Network Industries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6348, C.E.P.R. Discussion Papers.
    2. Gustav A. Horn & Katharina Dröge & Simon Sturn & Till van Treeck & Rudolf Zwiener, 2009. "Von der Finanzkrise zur Weltwirtschaftskrise (III)," IMK Report, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 41-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Toshitaka Sekine, 2009. "Another look at global disinflation," NBER Chapters, National Bureau of Economic Research, Inc, in: Financial Globalization, 20th Anniversary Conference, NBER-TCER-CEPR National Bureau of Economic Research, Inc.
    4. Hernando Zuleta & Andrew T. Young, 2011. "Golden Rules for Wages," Working Papers 10-05, Department of Economics, West Virginia University.
    5. Forges Davanzati, Guglielmo & Pacella, Andrea, 2013. "The profits-investments puzzle: A Post Keynesian-Institutional interpretation," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 26(C), pages 1-13.
    6. Ahsan, Reshad N. & Mitra, Devashish, 2014. "Trade liberalization and labor's slice of the pie: Evidence from Indian firms," Journal of Development Economics, Elsevier, Elsevier, vol. 108(C), pages 1-16.
    7. Oduor, Jacob, 2010. "Are prior restrictions on factor shares appropriate in growth accounting estimations?," Economic Modelling, Elsevier, Elsevier, vol. 27(2), pages 595-604, March.

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