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Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence

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  • Harrison, Ann

Abstract

In recent years, economists and other social scientists have devoted extensive research efforts to understanding the widening wage gap between high-skill and low-skill workers. This paper focuses on a slightly different question: how has globalization affected the relative share of income going to capital and labor? Using a panel of over one hundred countries, this paper analyses trends in labor shares and examines the relationship between shares and measures of globalization. Contrary to recent literature, the evidence suggests that labor shares are not constant over time. Over the 1960 to 2000 period, labor shares in poor countries fell, while shares in rich countries rose. These changes in labor shares are driven by changes in factor endowments and government spending, as well as by traditional measures of globalization, such as trade shares, exchange rate crises, movements in foreign investment, and capital controls. In particular, the results suggest that rising trade shares and exchange rate crises reduce labor’s share, while increasing capital intensity, capital controls and government spending increase labor’s share.

Suggested Citation

  • Harrison, Ann, 2005. "Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence," MPRA Paper 39649, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:39649
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    References listed on IDEAS

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    1. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
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    More about this item

    Keywords

    labor share; globalization; inequality;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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