Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries

In this paper, we explore the role of trade in the evolution of labor share in Latin American countries (LAC). We use trade agreements with large economies (US, EU, and China) to capture the effect of sharp changes in trade. During the last two decades, the countries that signed these trade agreemen...

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Autores principales: González-Rozada, Martín, Ruffo, Hernán
Formato: Artículo publishedVersion
Lenguaje:Inglés
Publicado: World Development (ISSN 1873-5991) 2024
Materias:
Labor share
Trade Agreements
Synthetic control methods
Acuerdos comerciales
Acceso en línea:https://repositorio.utdt.edu/handle/20.500.13098/12565
https://doi.org/10.1016/j.worlddev.2024.106561
Aporte de:
Repositorio Digital Universidad Torcuato Di Tella de Universidad Torcuato Di Tella
id I57-R163-20.500.13098-12565
record_format dspace
spelling I57-R163-20.500.13098-125652024-04-06T07:00:11Z Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries González-Rozada, Martín Ruffo, Hernán Labor share Trade Agreements Synthetic control methods Acuerdos comerciales In this paper, we explore the role of trade in the evolution of labor share in Latin American countries (LAC). We use trade agreements with large economies (US, EU, and China) to capture the effect of sharp changes in trade. During the last two decades, the countries that signed these trade agreements experienced a negative trend in labor share, while in the remaining countries there is an average increase in this share, generating a gap of 7 percentage points. We apply synthetic control methods, combined with regression analysis, to estimate the average causal impact of trade agreements on labor share. While effects are heterogeneous in our eight case studies, the average impact is negative between 2 to 4 percentage points of GDP four years after the entry into force of the trade agreements. This result is robust to the specification used and to the set of countries in the donor pool. We find that trade agreements with more labor-abundant counterparts affect labor share more, in line with traditional Heckscher–Ohlin forces. We also find that, after trade agreements, exports of manufactured goods and the share of industry to GDP increase on average, most notably in the case studies where negative effects on labor share are significant, a fact compatible with enhanced participation in Global Value Chains. Finally, a decomposition shows that all the reduction in labor share is explained by a negative impact on real wages. Este artículo se encuentra publicado en World Development (ISSN 1873-5991) Volume 177, May 2024 2024-04-05T17:05:10Z 2024-04-05T17:05:10Z 2024 info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion https://repositorio.utdt.edu/handle/20.500.13098/12565 https://doi.org/10.1016/j.worlddev.2024.106561 eng World Development (ISSN 1873-5991) Volume 177, May 2024 info:eu-repo/semantics/restrictedAccess http://rightsstatements.org/page/InC/1.0/?language=es 16 p. application/pdf application/pdf World Development (ISSN 1873-5991)
institution Universidad Torcuato Di Tella
institution_str I-57
repository_str R-163
collection Repositorio Digital Universidad Torcuato Di Tella
language Inglés
orig_language_str_mv eng
topic Labor share
Trade Agreements
Synthetic control methods
Acuerdos comerciales
spellingShingle Labor share
Trade Agreements
Synthetic control methods
Acuerdos comerciales
González-Rozada, Martín
Ruffo, Hernán
Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries
topic_facet Labor share
Trade Agreements
Synthetic control methods
Acuerdos comerciales
description In this paper, we explore the role of trade in the evolution of labor share in Latin American countries (LAC). We use trade agreements with large economies (US, EU, and China) to capture the effect of sharp changes in trade. During the last two decades, the countries that signed these trade agreements experienced a negative trend in labor share, while in the remaining countries there is an average increase in this share, generating a gap of 7 percentage points. We apply synthetic control methods, combined with regression analysis, to estimate the average causal impact of trade agreements on labor share. While effects are heterogeneous in our eight case studies, the average impact is negative between 2 to 4 percentage points of GDP four years after the entry into force of the trade agreements. This result is robust to the specification used and to the set of countries in the donor pool. We find that trade agreements with more labor-abundant counterparts affect labor share more, in line with traditional Heckscher–Ohlin forces. We also find that, after trade agreements, exports of manufactured goods and the share of industry to GDP increase on average, most notably in the case studies where negative effects on labor share are significant, a fact compatible with enhanced participation in Global Value Chains. Finally, a decomposition shows that all the reduction in labor share is explained by a negative impact on real wages.
format Artículo
publishedVersion
author González-Rozada, Martín
Ruffo, Hernán
author_facet González-Rozada, Martín
Ruffo, Hernán
author_sort González-Rozada, Martín
title Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries
title_short Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries
title_full Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries
title_fullStr Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries
title_full_unstemmed Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries
title_sort do trade agreements contribute to the decline in labor share? evidence from latin american countries
publisher World Development (ISSN 1873-5991)
publishDate 2024
url https://repositorio.utdt.edu/handle/20.500.13098/12565
https://doi.org/10.1016/j.worlddev.2024.106561
work_keys_str_mv AT gonzalezrozadamartin dotradeagreementscontributetothedeclineinlaborshareevidencefromlatinamericancountries
AT ruffohernan dotradeagreementscontributetothedeclineinlaborshareevidencefromlatinamericancountries
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