The Korean Economic Review
Globalization and Labor Demand Elasticities: Empirical Evidence from Nine OECD Countries
Hwan-Joo Seo (Hanyang University), Han Sung Kim (Ajou University), Young Soo Lee (Korea Aerospace University)Year 2015Vol. 31No. 2
AbstractThis study empirically analyzes the impact of globalization on the elasticity of demandfor labor using manufacturing data for nine OECD countries. While previous studiesfocused on the relationship between trade and elasticity of demand for labor, we alsoconsider the effect of international capital mobility. Our main findings can be summarizedas follows. Firstly, the results confirm that increased trade has made labor demand moreelastic in Austria, Finland, France, Germany, the UK and the US. Second, financialopening, as in the case of trade liberalization, affects labor demand, making it more elastic.We confirm this finding for Finland, Sweden, Korea, Germany and the UK. In the case ofFinland, Germany and the UK, both trade and financial opening render labor demandmore elastic. Finally, we find that globalization has reduced the share of labor within totalrevenue, possibly due to reduction in the bargaining power of workers as suggested by Rodrik(1997).