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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.

Suggested Citation

  • Ozlem Onaran, 2005. "Distribution and Globalization: A Wage Bargaining Model," Working Papers geewp48, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
  • Handle: RePEc:wiw:wiwgee:geewp48
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    4. 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.
    5. Harrison, Ann, 2005. "Has Globalization Eroded Labor’s Share? Some Cross-Country Evidence," MPRA Paper 39649, University Library of Munich, Germany.
    6. 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.
    7. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
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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 and Business, Department of Economics.

    More about this item

    Keywords

    Labor’s share; neoliberal policies; globalization;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration

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