Globalization, Productivity Growth, and Labor Compensation

We analyse how changes in international trade integration affect productivity and the functional income distribution. To account for endogeneity, we construct a leave-out measure for international trade integration for country-industry pairs using international input-output tables. First, we corroborate on the country-industry level that internationaltrade integration increases productivity. Second, we show that international tradeintegration is associated with higher labour shares in advanced countries but with lower labour shares in manufacturing industries in emerging markets. Finally, we briefly discuss the implications of our results for a possible throwback in international trade integration due to experiences from recent crises