Globalization, creative destruction, and labor share change: Evidence on the determinants and mechanisms from longitudinal plant-level data

We examine the sources and micro-level mechanisms of the changes in the labor share of value added. We link the micro-level dynamics of the labor share change with that of productivity and wage growth. Using a useful variant of the decomposition method we make a distinction between the change in the average plant and the micro-level restructuring. With Finnish plant-level data covering three decades we show that micro-level restructuring is the link between the declining labor share and increasing productivity in 12 manufacturing industries of four regions, and that increased international trade is a factor underlying those shifts.

Keywords: Globalization, international trade, foreign ownership, micro-level restructuring, labor share
Published: 1.1.2009
JEL: F16, J31
ISBN: 978-952-209-064-5
ISSN: 1795-1801
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