Article Trade Dynamics and Labor Income Share: Evidence from Panel Data

Trade Dynamics and Labor Income Share: Evidence from Panel Data

Abstract

Objective:  This research aims to determine the effect of different trade dynamics on the labor income share in advanced, developing, and emerging economies.

Research Gap: Research on trade dynamics such as trade openness, trade diversification, trade competitiveness, and trade globalization is scarce, particularly to observe the influence of different trade dynamics on labor market outcomes.

Design/Methodology/Approach:  This study utilizes the GMM estimation technique to find the association between trade-related dynamics and labor income share.

Main Findings: Our findings demonstrate that trade openness and trade competitiveness lead to an increase in the labor income share in advanced economies. Trade diversification increases labor income share in emerging and developing economies. Most importantly, trade globalization has a positive and significant influence on the labor income share. The research shows that different trade dynamics influence labor income share in numerous ways.

Theoretical / Practical Implications of the Findings: This study offers meaningful insight into the literature and relationships between trade dynamics and labor income. Additionally, the study recommends that policymakers implement policies that are related to trade agreements that enhance labor standards and improve laws related to labor protection, which contribute to raising labor income.

Originality/Value: The research is valuable as it provides a comprehensive analysis of the different trade-related dynamics on one of the key labor market outcomes, namely, labor income share. A topic that has limited research, so this study adds to the body of literature.