Global Value Chain Participation and the Labour Share: Industry‐level Evidence from Emerging Economies

Abstract

Participation in global value chains (GVCs) has been proposed as a central means for emerging economies to develop and technologically upgrade. However, the effects of GVCs on income distribution in the global South remain underexplored. This article presents an econometric analysis of the determinants of the labour share in seven emerging economies for the period 1995–2014. Drawing on industry‐level data from global input‐output tables, the authors focus on how GVC participation — in particular offshoring of production from advanced to emerging economies — affects the labour share of different skill groups within manufacturing and service industries. They also estimate the effects of GVCs on productivity, real wages and the capital–value added ratio, to shed further light on the channels through which GVCs affect the labour share. In both industry groups, findings show that integration into GVCs with advanced economies has a negative effect on the labour share in emerging economies, particularly for medium‐skilled workers. In contrast, higher union density and government consumption spending have positive effects on the labour share. Thus, labour in emerging economies loses out relative to capital as production becomes more integrated across borders.

Globalization, Productivity Growth, and Labor Compensation

“…This result is supported by the findings ofGuschanski and Onaran (2021) as they also show that there is a negative correlation between increased global integration and labor shares in manufacturing industries of emerging countries.…”

Financialization and sluggish recovery of firms' investment: Global evidence from the 2007–2008 financial crisis

“…When firms' performances are poor, owing to the turmoil of external market conditions or their internal operations, managers under the stock option management system have a strong incentive to increase holdings of those high-yielding financial assets to boost financial performances and the stock prices of firms (Jayadev & Epstein, 2019;Lin & Tomaskovic-Devey, 2013). Therefore, financialization with the purpose of performance adjustment is essentially a kind of earnings manipulation through speculation between the real sector and the financial market, implying that managers may use financial tools (e.g., stock repurchases) to improve profit performances and shareholders' interests (Guschanski & Onaran, 2018) instead of increasing investments and labour incomes to achieve sustainable development.…”

Equitable Global Value Chain and Production Network as a Driver for Enhanced Sustainability in Developing Economies

“…Indeed, GVC issues cannot be separated from the concept of sustainable development (which seeks to enhance and balance economic, social and environmental development now and in the future), whether sustainable development is analysed using a historical or transhistorical perspective [21] or even a contemporary perspective [22]). In light of these, we contribute to the GVC literature and debate by arguing that one of the biggest risks to economic and social upgrading and for an equitable drive towards sustainable development in the global South is a result of the disproportionate flow of some resource inputs into the value added activities between the global North and global South countries (see, Guschanski and Onaran [23]).…”