Globalization, productivity growth, and labor compensation

Christian Dreger, Marius Fourné and Oliver Holtemöller

No 7/2022, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: We analyze how changes in international trade integration affect productivity and the functional income distribution. To account for endogeneity, we construct a leaveout measure for international trade integration for country-industry pairs using international input-output tables. Our findings corroborate on the country-industry level that international trade integration increases productivity. Moreover, we show that both trade in intermediate inputs and trade in value added is associated with lower labor shares in emerging markets. For advanced countries, we document a positive effect of trade in value added on the labor share of income. Further, we show that the effects on productivity and labor share are heterogeneous across different sectors. Finally, we discuss the implications of our results for a possible throwback in international trade integration due to experiences from recent crises.

Keywords: global value chains; globalization; income distribution; labor share; productivity (search for similar items in EconPapers)
JEL-codes: F4 F6 J3 (search for similar items in EconPapers)
Date: 2023, Revised 2023
New Economics Papers: this item is included in nep-eff, nep-int, nep-opm and nep-tid
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Related works:
Working Paper: Globalization, Productivity Growth, and Labor Compensation (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:72022

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