Does economic globalization cause the decline of the labor share: an empirical cross country analysis of manufacturing industry

Abstract

I examine the empirical relationship between economic globalization (measured by outsourcing) and the labor share in a panel of up to 40 countries and 14 two-digit manufacturing industries covering a period from 1996 through 2012. Empirical studies investigate the role of economic globalization in explaining labor share, by grouping countries and industries into three groups: labor intensive vs capital intensive, skilled vs unskilled labor force and labor market institutions. This study provides additional empirical evidence to challenge the argument that economic globalization contributes to the decline of the labor share. In particular, the positive correlation between the labor share and economic globalization suggests that economic globalization might not be the contributor to the decline of the labor share.