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Distribution and Globalization: A Wage Bargaining Model

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  • Ozlem Onaran

    ()
    (Vienna University of Economics & B.A.)

Abstract

This paper develops a model of distribution to analyze the effects of neoliberal globalization on labor in the developing countries. Distribution is determined via wage bargaining by workers, price setting by firms, and improvements in productivity. The full model has the nature of a Post-Keynesian conflicting claims model for an open economy under the pressure of globalization. The conflict inflation is extended to an open economy case with imported inputs, where the pass through effect of the depreciation of the local currency also becomes important. The variables that reflect the macroeconomic effects of globalization are modeled as parameters that affect the bargaining power of labor on two levels: the first group is related with the interaction with the global economy, i.e. international trade, and FDI. The second is about the domestic fiscal and monetary policy variables, which are particularly related to the specific form that globalization takes in the era of neoliberalism, i.e. government expenditures, and the interest rate. Then the model is solved for distribution of income, i.e. the wage share, thus a reduced form of the model is obtained, which is estimated in a companion paper to test whether the change in the international and domestic macroeconomic environment has affected the decline the labor’s share.

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Bibliographic Info

Paper provided by Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness in its series Working Papers with number geewp48.

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Date of creation: Feb 2005
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Handle: RePEc:wiw:wiwgee:geewp48

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Keywords: Labor’s share; neoliberal policies; globalization;

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  1. Kang-Kook Lee & James Crotty, 2004. "Was the IMF's Imposition of Economic Regime Change Justified? A Critique of the IMF's Economic and Political Role in Korea During and After the Crisis," Working Papers wp77, Political Economy Research Institute, University of Massachusetts at Amherst.
  2. Dollar, David & Kraay, Aart, 2001. "Trade, growth, and poverty," Policy Research Working Paper Series 2615, The World Bank.
  3. Gary Dymski & James Crotty, 2000. "Can the Global Neoliberal Regime Survive Victory in Asia? The Political Economy of the Asian Crisis," Published Studies ps5, Political Economy Research Institute, University of Massachusetts at Amherst.
  4. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  5. James Crotty & Kang-Kook Lee, 2002. "A political-economic analysis of the failure of neo-liberal restructuring in post-crisis Korea," Cambridge Journal of Economics, Oxford University Press, vol. 26(5), pages 667-678, September.
  6. Harrison, Ann, 2005. "Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence," MPRA Paper 39649, University Library of Munich, Germany.
  7. Peter R. Fallon & Robert E. B. Lucas, 2002. "The Impact of Financial Crises on Labor Markets, Household Incomes, and Poverty: A Review of Evidence," World Bank Research Observer, World Bank Group, vol. 17(1), pages 21-45.
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Cited by:
  1. Özlem Onaran & Engelbert Stockhammer, 2006. "The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: A sectoral analysis," Department of Economics Working Papers wuwp094, Vienna University of Economics, Department of Economics.

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