Globalization and Labor Force Participation

Stacie Beck () and Soodong Park ()
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Stacie Beck: University of Delaware, Postal: Department of Economics, University of Delaware, Newark, DE, 19716, USA
Soodong Park: University of Delaware, Postal: Department of Economics, University of Delaware, Newark, DE, 19716, USA

Journal of Economic Integration, 2018, vol. 33, issue 3, 433-465

Abstract: This study finds evidence that globalization depresses labor force participation via social spending and tax policy. We estimate a panel Vector Auto Regression model on data over the period of 1980~2012 from the 26 OECD countries. Social spending has increased, consistent with the compensation hypothesis, while labor income taxes have risen relative to capital income taxes, consistent with tax competition hypothesis. As a result, one can see the reduction of labor force participation. Social safety nets and tax policies need to be streamlined upon globalization.

Keywords: Fiscal policy; Globalization; Labor force participation; Tax competition; Compensation hypothesis; Panel VAR (search for similar items in EconPapers)
JEL-codes: F15 F66 H87 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0748

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