English, Article, Journal or magazine article edition: Globalization, EU Enlargement and Income Distribution Fritz Breuss

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Bookmark: http://trove.nla.gov.au/version/180539
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Globalization, EU Enlargement and Income Distribution
Author
  • Fritz Breuss
Physical Description
  • preprint
Notes
  • Advanced industrial countries have been exhibiting a steady decline of the labor income shares in the last two decades. We explain this phenomenon by resorting to the old Stolper-Samuelson theorem. The conclusions concerning the impact of free trade on the income distribution are unambiguous in a Heckscher-Ohlin world with two countries, two goods and two factors of production (capital and labor). In contrast, the consequences of FDI from the capital abundant country (EU) to the labor abundant CEEC are ambiguous. Both scenarios are investigated theoretically and then simulated with a hypothetical two country CGE model, including the EU and the CEEC. A panel regression for both regions separately, helps to decide empirically which influences on the development of the labor income shares are at work. Globalization, measured by revealed comparative advantage (increase in global net trade) has contributed to a decline in the labor income shares in the EU. Additionally, those countries which are engaged more in trade with the CEEC can expect a sharper decline in the wage share. Global net FDI outflow also exerts a negative influence on the labor income share in the EU. In the CEEC the increase in global net trade had a positive influence on the labor income share, trade with the EU, however, dampened the labor income share. FDI inflow increased the labor income share in the CEEC.
  • Eu, EU27, Globalization, EU Enlargement, Income Distribution
  • RePEc:wsr:wpaper:y:2007:i:008
  • Advanced industrial countries have been exhibiting a steady decline of the labour income shares in the last two decades. The study explains this phenomenon by resorting to the old Stolper-Samuelson theorem. The conclusions concerning the impact of free trade on the income distribution are unambiguous in a Heckscher-Ohlin world with two countries, two goods and two factors of production (capital and labour). In contrast, the consequences of FDI from the capital abundant country (EU) to the labour abundant CEECs are ambiguous. Both scenarios are investigated theoretically and then simulated with a hypothetical two-country CGE model, including the EU and the CEECs. A panel regression for both regions separately helps to decide empirically which influences on the development of the labour income shares are at work. Globalisation, measured by revealed comparative advantage (increase in global net trade) has contributed to a decline in the labour income shares in the EU. Additionally, those countries which are engaged more in trade with the CEECs can expect a sharper decline in the wage share. Global net FDI outflow also exerts a negative influence on the labour income share in the EU. In the CEECs the increase in global net trade had a positive influence on the labour income share, trade with the EU, however, dampened the labour income share. FDI inflow increased the labour income share in the CEECs.
  • Globalisation, EU Enlargement, Income distribution
  • RePEc:wfo:wpaper:y:2007:i:296
Language
  • English
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