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Effects of Globalization on Labor’s Share in National Income

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  • Anastasia Guscina

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.

Suggested Citation

  • Anastasia Guscina, 2006. "Effects of Globalization on Labor’s Share in National Income," IMF Working Papers 06/294, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:06/294
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    References listed on IDEAS

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    Cited by:

    1. Andrew T. Young & Hernando Zuleta, 2016. "Golden Rules of Wages," Southern Economic Journal, Southern Economic Association, vol. 83(1), pages 253-270, July.
    2. Du, Julan & Fang, Hongsheng & Jin, Xiangrong, 2014. "The “growth-first strategy” and the imbalance between consumption and investment in China," China Economic Review, Elsevier, vol. 31(C), pages 441-458.
    3. Forges Davanzati, Guglielmo & Pacella, Andrea, 2013. "The profits-investments puzzle: A Post Keynesian-Institutional interpretation," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 1-13.
    4. Toshitaka Sekine, 2009. "Another Look at Global Disinflation," NBER Chapters,in: Financial Globalization, 20th Anniversary Conference, NBER-TCER-CEPR National Bureau of Economic Research, Inc.
    5. Özlem Onaran, 2008. "The Effects of Globalization on Wages, Employment, and Wage Share in Austria," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 34(3), pages 337-360.
    6. Gustav A. Horn & Katharina Dröge & Simon Sturn & Till van Treeck & Rudolf Zwiener, 2009. "Von der Finanzkrise zur Weltwirtschaftskrise (III)," IMK Report 41-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Malte Luebker, 2017. "Poverty, employment and inequality in the SDGs: heterodox discourse, orthodox policies?," Chapters,in: Sustainable Development Goals and Income Inequality, chapter 8, pages 141-168 Edward Elgar Publishing.
    8. repec:voj:journl:v:63:y:2016:i:2:p:231-258 is not listed on IDEAS
    9. Sheida Teimouri, 2015. "Currency crises and dynamics of real wages," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 377-403, May.
    10. Ghazala Azmat & Alan Manning & John Van Reenen, 2007. "Privatization, Entry Regulation and the Decline of Labor's Share of GDP: A Cross-Country Analysis of the Network Industries," CEP Discussion Papers dp0806, Centre for Economic Performance, LSE.
    11. Ahsan, Reshad N. & Mitra, Devashish, 2014. "Trade liberalization and labor's slice of the pie: Evidence from Indian firms," Journal of Development Economics, Elsevier, vol. 108(C), pages 1-16.
    12. Oduor, Jacob, 2010. "Are prior restrictions on factor shares appropriate in growth accounting estimations?," Economic Modelling, Elsevier, vol. 27(2), pages 595-604, March.
    13. Elsa Orgiazzi & Paul Maarek, 2010. "Which factor bears the cost of currency crises?," 2010 Meeting Papers 810, Society for Economic Dynamics.
    14. repec:taf:raaexx:v:18:y:2011:i:2:p:201-211 is not listed on IDEAS
    15. repec:eee:poleco:v:52:y:2018:i:c:p:18-35 is not listed on IDEAS
    16. Croci Angelini, Elisabetta & Farina, Francesco & Valentini, Enzo, 2017. "Wages and employment by skill level in Southern and Eastern Europe during the crisis," GLO Discussion Paper Series 153, Global Labor Organization (GLO).
    17. Ernesto Screpanti, 2010. "La grande crisi e l’imperialismo globale," Department of Economics University of Siena 590, Department of Economics, University of Siena.
    18. Omer GOKCEKUS & Kevin BENGYAK, 2015. "Learning Heckscher-Ohlin Model in Five Easy Steps," Journal of Economics and Political Economy, KSP Journals, vol. 2(1), pages 137-143, March.

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