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Effects of Globalizationon Labor's Share in National Income

  • Anastasia Guscina
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    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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    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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    1. Emma Aisbett, 2007. "Why are the Critics So Convinced that Globalization is Bad for the Poor?," NBER Chapters, in: Globalization and Poverty, pages 33-86 National Bureau of Economic Research, Inc.
    2. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
    3. Ripatti, Antti & Vilmunen, Jouko, 2001. "Declining labour share – Evidence of a change in underlying production technology?," Research Discussion Papers 10/2001, Bank of Finland.
    4. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
    5. Alan V. Deardorff, 2003. "What Might Globalisation's Critics Believe?," The World Economy, Wiley Blackwell, vol. 26(5), pages 639-658, 05.
    6. Daron Acemoglu, 2000. "Labor- and Capital- Augmenting Technical Change," NBER Working Papers 7544, National Bureau of Economic Research, Inc.
    7. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
    8. Minsik Choi, 2001. "Threat Effect of Foreign Direct Investment on Labor Union Wage Premium," Working Papers wp27, Political Economy Research Institute, University of Massachusetts at Amherst.
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