Economics

Will falling domestic labor compensation share really be improved when global trade slowdown?

L. Wang and T. S. Ramsey

This research by Lei Wang and Thomas Stephen Ramsey delves into how Global Value Chain participation influences domestic labor compensation share across 51 economies from 2000 to 2018. The findings reveal a troubling trend: GVC participation overall negatively impacts labor compensation share, but forward participation could provide stability. Discover key insights and suggested policies that could enhance labor compensation amid changing global dynamics.

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Playback language: English

Index

Abstract

This paper explores the impact of Global Value Chain (GVC) participation on domestic labor compensation share in 51 economies from 2000 to 2018. Using the SDA method and multiple panel regression, the study finds an overall negative effect of GVC participation on labor compensation share. However, forward participation in GVCs (upstream linkages) is more effective in stabilizing labor compensation share than backward participation (downstream linkages). Capital-biased technological progress and the availability of overseas labor are identified as key mechanisms through which GVC participation undermines domestic labor compensation. The paper suggests policies such as promoting fair competition, servitization of industrial structure, and establishing relational value chains to improve labor compensation share.

Publisher

Humanities & Social Sciences Communications

Published On

Sep 19, 2023

Authors

Lei Wang, Thomas Stephen Ramsey

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