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The effect of global value chain participation on the labour share – Industry level evidence from emerging economies

The effect of global value chain participation on the labour share – Industry level evidence from emerging economies

Guschanski, Alexander ORCID: 0000-0002-7818-8264 and Onaran, Özlem ORCID: 0000-0002-6345-9922 (2021) The effect of global value chain participation on the labour share – Industry level evidence from emerging economies. [Working Paper] (Unpublished)

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Abstract

We present an econometric analysis of the determinants of the labour share in seven emerging economies from 1995 to 2014. We focus on the effect of global value chain participation, in particular offshoring from advanced to emerging economies based on global input-output tables. The use of industry-level data allows us to distinguish the impact on workers of different skill groups within manufacturing and service industries. We find that integration into global value chains with advanced economies reduces the labour share in emerging economies, in both manufacturing and service industries, particularly for medium-skilled workers. Global value chain participation increases productivity, but it also reduces the bargaining power of labour and allows firms to charge a higher markup, leading to a decline in the labour share. In contrast, higher union density and government consumption spending increase the labour share. Labour in emerging economies loses out as production becomes more integrated across borders. Our results indicate that reversing the fall in the labour share requires changes in labour market institutions and fiscal policies to improve the bargaining power of labour.

Item Type: Working Paper
Uncontrolled Keywords: labour share; income distribution; emerging economies; global value chains; union density; technological change
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 04 Aug 2021 16:33
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: None
URI: http://gala.gre.ac.uk/id/eprint/31973

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