Financial globalisation and the labour share in developing countries: The type of capital matters

In this paper, we investigate how de facto financial globalisation has influenced the labour share in developing countries. Our main argument is the need to distinguish between different types of capital in this context as they differ in their effect on the host countries' production process and vary concerning their bargaining power vis-à-vis labour. Our econometric analysis of the impact of foreign direct versus portfolio investment in a sample of about 40 developing and transition countries after 1992 supports this claim. Using different panel data techniques to address potential endogeneity problems, we find that foreign direct investment has a positive effect on the labour share in developing countries, while the impact of portfolio investment is significantly smaller and potentially negative. Our results also highlight that de facto foreign investment cannot explain the decline of the labour share in developing countries over the investigated period.     

Has the decline in the productivity of capital been halted?

On a long-term assessment, the economic situation in the industrial countries has grown more difficult. Unemployment is higher than it was in the 1960s, while growth both in the economy as a whole and in productivity is now slower. High labour costs are frequently cited as the underlying cause of these changes. This article sets out to counter (or to complement) this supposition by directing the spotlight on to what has now become a substantial decline in capital productivity in the industrial countries.     

Community-Based Agencies as the Entrepreneur's Instruments of Control in Post-Soeharto's Indonesia

The shift of power in Indonesia, marked by the fall of the Soeharto regime in 1998, has brought changes to state industrial relations policies. One of these changes has been at the level of military involvement in dispute settlement, which has considerably declined since 1998. Eight years on, the liberty of factory owners to employ military personnel to contain labour activism has been considerably constrained. As a result, entrepreneurs have turned to civilian, community-based institutions and local personalities as an alternative avenue of labour control. Examination is made of evolving structures of extra-firm labour control in Tangerang, an industrial centre in the greater Jakarta area, where many local power-holders also own the lodgings rented by migrant manufacturing workers. It describes how their father–child relationship (a special extension of the patron–client relation in the Indonesian context) with their tenants gives them the persuasive capacity to appease discontented workers. This persuasive quality has proven to be even more effective than the coercive approach exercised by the military in the past. Examination is also made of the implications of these developments for industrial relations in the manufacturing sector.     

The impact of core labour standards on exports

Developed countries contend that trade in goods whose production is not in conformity with internationally recognized basic labour standards should be restricted, while developing countries view any attempt to link trade and labour standards as a form of protectionism that intends to end their comparative advantage. This paper provides an empirical examination of the relation between trade and core labour standards. It develops an export supply function and uses OLS techniques to test it for 58 non-OECD countries. It finds that only one core standard, the right to organize and collective bargaining, has a statistically significant negative impact on exports. The results are insensitive to the level of development of the countries included in the study. The main conclusion that emerges is that, ignoring the right to organize and collective bargaining, core labour standards do not play a significant role in trade performance.     

Globalisation,Women's Economic Rights and Forced Labour

Globalisation critics are concerned that increased trade openness and foreign direct investment exacerbate existing economic disadvantages of women and foster conditions for forced labour. Defenders of globalisation argue instead that as countries become more open and competition intensifies, discrimination against any group, including women, becomes more difficult to sustain and is therefore likely to recede. The same is argued with respect to forced labour. This article puts these competing claims to an empirical test. We find that countries that are more open to trade provide better economic rights to women and have a lower incidence of forced labour. This effect holds in a global sample as well as in a developing country sub‐sample and holds also when potential feedback effects are controlled via instrumental variable regression. The extent of an economy's ‘penetration’ by foreign direct investment by and large has no statistically significant impact. Globalisation might weaken the general bargaining position of labour such that outcome‐related labour standards might suffer. However, being more open toward trade is likely to promote rather than hinder the realisation of two labour rights considered as core or fundamental by the International Labour Organisation, namely the elimination of economic discrimination and of forced labour.     

Management and the Taff Vale Strike of 1900

The Taff Vale Railway strike of 1900 stands as a landmark in the history of industrial relations in Britain. There is a substantial literature dealing with the strike and resulting court case. Yet relatively little attention has been paid to the underlying pressures and tensions which gave rise to the strike nor to its wider consequences: the focus hitherto has been on labour, politics and labour law rather than the dynamics of the struggle between capital and labour which raged throughout the railway industry. The strike resulted from a clash between an assertive labour movement and a beleaguered management with little financial room for manoeuvre. Victory for capital paved the way for far-reaching changes in technology and working methods without conceding the gains to labour through the agency of trade union action.     

Corporate Taxation of Heterogeneous Firms and the Welfare Effects of Labour Unions

This paper examines the welfare effects of powerful labour unions when the government levies a uniform tax rate – as is currently the case in most OECD countries – and firms are heterogeneous with respect to productivity. I show that an increase in the bargaining power of labour unions can decrease the welfare loss generated by restriction of the tax policy and provide conditions under which powerful labour unions decrease the likelihood that firms will move abroad. I also reproduce the well‐known effect whereby powerful labour unions decrease corporate tax rates if firms are mobile.     

Cones of diversification in a model of international comparative advantage

The hypothesis that all countries belong to a single cone of diversification is often used in studies of international trade. However, contrary to this hypothesis, the range of capital–labour input ratios in US industries does not encompass the range of capital– labour endowment ratios in the world’s economies. Furthermore, among countries with capital–labour endowment ratios below the range of US capital–labour input ratios, wage rates are much lower than in the US. In this paper, the one-cone hypothesis is assessed relative to a two-cone alternative by clustering countries with similar factor proportions, estimating regressions for gross national product and net exports, testing for equality of coefficients, and approximating the posterior odds on one- and two-cone models. Rejecting the one-cone hypothesis, the paper presents estimates of a two-cone model and considers their implications for factor flows and the prospects of emerging market economies.     

The role of small firms in Indonesia

During the last two decades small firms in developing countries have received more and more attention from researchers and policy makers. For this, several reasons have been brought forward. The decline in labour absorption in agriculture and the slow growth of employment opportunities in the other sectors of the economy, combined with the fact that the growth of the labour force has accelerated, have led to un- and under-employment problems in many of these countries.Small firms are generally viewed as a useful means of alleviating these problems, because medium and large firms only would not help to solve the problems. However, from this study it can be concluded that the medium and large firms in the manufacturing sector in Indonesia are doing better in employment and income than generally anticipated.The purpose of this study is to examine the relative pattern of change and development of small firms in the manufacturing sector in Indonesia in the last two decades and possible factors affecting their growth. Also the relative importance of small firms in terms of income generation will be assessed.The study will use national data collected from the Department of Industry and Central Bureau of Statistic in Indonesia. Further, the study will be based, for its theoretical analysis, on relevant literature on the subject and on some empirical studies in Indonesia as well as in other developing countries.     

Trade Wars: The Exaggerated Impact of Trade in Economic Debate

The rules governing trade and capital flows have been at the centre of controversy as globalisation has proceeded. One reason is the belief that trade and capital flows have massive effects on the labour market – either positive, per the claims of international financial institutions and free trade enthusiasts, or negative, per the ubiquitous protestors at WTO, IMF and World Bank meetings demanding global labour standards. Comparing the claims made in this debate with the outcomes of trade agreements, this paper finds that the debate has exaggerated the effects of trade on economies and the labour market. Changes in trade policy have had modest impacts on the labour market. Other aspects of globalisation – immigration, capital flows and technology transfer – have greater impacts, with volatile capital flows creating great risk for the well-being of workers. As for labour standards, global standards do not threaten the comparative advantage of developing countries nor do poor labour standards create a ‘race to the bottom’.     

Understanding Participation

The word 'participation' is taken to refer to a situation in which employees have some sort of share in the businesses which employ them. On this basis a classificatory scheme is produced which distinguishes between different forms of participation as well as the sources and motives behind those different forms. Participation as a whole is then distinguished from bargaining between management and labour. In bargaining, separate and opposing interests are accepted. In participation, there is an attempt to produce an over-arching common interest. More importantly, bargaining operates outside those organizational arrangements definitive of a business which grant a strictly subordinate role to labour with respect to management structures and property entitlements. In contrast, participation is a modification of those arrangements up to, but not beyond, a position of equality for labour. It is this which gives participation its essentially reformist character and exposes it to attack from both those seeking a more than participatory share to labour and those for whom even a participating share is excessive.     

Ageing societies and challenges for collective bargaining policy

The ongoing demographic changes in the industrialised countries mean not only that the ratio of pensioners to the number of people working has increased and is projected to continue to do so, but also that the average age of the labour force is increasing. These developments confront collective bargaining policy with new challenges as the size and characteristics of the labour supply change, as do the interests of the median trade union member. The following article examines these challenges using the example of Germany.     

Child Labour Use and Economic Growth: An Econometric Analysis

We present a simple dynamic theory of child labour, human capital formation, and economic growth that is consistent with some of the main features of child labour and economic development. The model supports a number of testable hypotheses, which we investigate econometrically in a systems approach. Using panel data from 64 countries in the period 1960–1980, the econometric results match the theory well. The incidence of child labour is negatively related to parental human capital and education quality, but is positively correlated with education cost. Further, countries with higher amounts of child labour tend to have lower stocks of human capital in the future. There is also a convergence phenomenon between the level and growth of human capital. The lower the current stock of human capital, the higher is current child‐labour use and the faster is the growth rate of human capital.     

Last line of resistance or a golden opportunity: Australian trade union responses to globalization

This contribution concentrates on the response of the trade union movement in Australia to globalization. Firstly, it outlines the evidence of the effects of globalization on labour markets, including the impact on wage inequaliry employment securiry and collective bargaining. Secondly, it looks at the strategic union response to the effects of globalization in terms of trade policy responses, international labour cooperation and traditional industrial campaigns on globalization issues. It suggests that unions can employ a combination of international and domestic strategies to deal with globalization.     

Financial contagion in East Asia and the origins of the economic and financial crisis in Korea

In this article the major elements of the 30 year old Asian development model are examined in the light of the financial crisis in the region. The notion of a common model is examined and found to be overstated. The monetary crisis in Asia has affected countries to different degrees, with Indonesia and Korea being particularly weakened. Korea has two major economic problems which can be traced to economic policies established in the 1960s. First, the industrial organization of the economy under a few industrial conglomerates, which has outlived its usefulness and is now a major source of the troubles in the economy. The conglomerates have been responsible for an investment policy where risk has been pushed to recklessness and the rate of return on capital employed is meagre. Second, banking policy, which is best characterized as a severe form of ‘moral hazard’. Both of these policies, while having played major parts in past economic successes, are now the main cause of a weakened economy in a globalized world.     

The rise of the machines: Capital imports and real manufacturing wages in 57 nations

Outward-oriented policy reform has attracted a large number of academics to the study of the trade-labour market nexus. One of these fields has focused on capital intensive (machinery) imports and its effect on manufacturing wages. The skill-enhancing-trade (SET) hypothesis was put forth to explain a potential relationship where an inflow of capital imports results in increased demand for skilled labour and decreased that of unskilled labour, and thus resulted in a rise in skilled wages and a decrease in their unskilled counterparts. This study revisits this hypothesis with a panel from the manufacturing sector of 57 nations. We improve upon previous studies in a number of ways. We add developed nations to the sample and examine capital imports from rich countries as well as the rest of the world. This takes into account the prominence of vertical production networks in international trade. We adhere closely to the neo-classical trade model and employ definitions of skilled and unskilled workers that capture the production process of particular items. Finally, we fit a robust dynamic panel data model that accounts for the endogeneity of the determinants of trade and wages. In this way we test whether the SET hypothesis is generally applicable as opposed to previous studies which use an ad hoc selection of countries and variables. We find that the SET hypothesis is not driving changes in manufacturing wages. Instead, worker productivity and GDP per capita explain these labour market outcomes.     

Does Globalisation Affect Crime? Theory and Evidence

Globalisation sceptics argue that trade liberalisation has high social costs, including an increase in expropriative behaviour such as civil conflict, coercion of labour and crime. We show that a theoretical relationship between trade and expropriation exists, but the sign differs for developed and developing economies. We verify this empirically using data on crime rates. Specifically, we find that trade liberalisation, as measured by both higher openness and lower import duty rates, tends to increase burglaries and theft in very labour‐abundant countries. For other countries, however, we find that trade liberalisation has either a small negative effect on crime or no effect, depending on the country's capital abundance.     

Impacts of short-term interest rates on stock returns and exchange rates: Empirical evidence from EAGLE countries

In this study, we estimate Bayesian vector autoregression (BVAR) and time-varying structural VAR (TVP-VAR) models for Brazil, Indonesia, Mexico and Turkey to analyze the impacts of short-term interest rates on stock prices and exchange rates considering the relationships between these variables. BVAR and TVP-VAR models’ estimations indicate that monetary policy decisions of these countries lead to capital movements as well as capital movements may create a considerable amount of variation in exchange and stock markets both in the periods of economic stability and financial crisis. We also reveal that increases in interest rates intending to prevent capital outflows may lead to decrease in stock returns, which in turn may deteriorate the real economic activity in Indonesia, while changes in short-term interest rates in Brazil, Indonesia and Turkey cannot be used as a tool to stabilize the value of their home currencies against the USD. Our study highlights the importance of formulating an optimal monetary policy framework accompanied by macro-prudential polices, which help to reach inflation target and smooth the possible variations in exchange rates and stock prices during economic crisis conditions in Brazil, Indonesia, Mexico and Turkey.     

Unlocking the Potential of Greater Female Employment in Europe

This paper investigates the drivers of female labour force participation in Europe, as well as the implications of achieving greater gender diversity in senior corporate positions. Re-examining the drivers of women’s decisions to work is particularly important in the context of Europe. In many European countries, the process of closing gender gaps in labour force participation has stalled, despite greater gender equality in human capital investment, declining birth rates, changing social norms and equal legal access to employment opportunities.     

黑龙江参与东北亚区域经济合作研究

黑龙江省具有丰富的经济资源,良好的工业基础,劳动力资源优势,在东北亚及我国具有举足轻重的战略地位。黑龙江省由于外资利用水平较低、对外经济合作没有形成规模,与东北亚国家经济合作仍不足。黑龙江省为更好地参与东北亚区域经济一体化,应提高外资利用水平、改善投资环境,积极进行区域科技合作,构建出口生产体系。