2022/11 | LEM Working Paper Series | ||||||||||||||||
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The labour share along global value chains. Perspectives and evidence from sectoral interdependence |
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Federico Riccio, Lorenzo Cresti and Maria Enrica Virgillito |
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Keywords | |||||||||||||||||
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Structural Change; Global Value Chains; Labour Share.
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JEL Classifications | |||||||||||||||||
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F14, J31, O14
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Abstract | |||||||||||||||||
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This article proposes a novel framework to investigate how globalisation affects workers'
share of value added. We explore functional income distribution by looking at industrial
interdependence and thus identifying GVCs as the unit of analysis; we then track inputs composition and
their labour share evolution along the value chains. First, we find widespread heterogeneous patterns
across value chains components, accounting for the direct, domestic and foreign requirements of the
chains, inside an overall declining trend. Second, we study the evolution of the vertical labour share
along development stages. Finally, by means of a shift-share analysis, we investigate what drives
such decline in the vertical labour share: albeit country-sector idiosyncratic factors accounted by
the within-input component contribute the most, between-input reallocation - GVCs restructuring
- matters particularly to detect the role played by foreign contributions. In essence, we provide
evidence of a recombination of inputs toward emerging economies and service-based activities. Such
recombination negatively impacts upon the overall labour share dynamics. Overall, our
methodology contributes to better understanding the process of fragmentation of production and international
division of labour by developing a series of novel and fine-grained indicators; in addition, it allows
to study the ensuing implication for functional income distribution.
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