Labor-abundant Countries Research Articles

Unlocking trade potential: gender equality, economic complexity and trade openness in the Developing-8 (D-8) countries

PurposePrioritizing the shift from a traditional economy towards complex integrated economies has been the top priority among policymakers to achieve sustainable development goals (SDGs). Countries involved in economic integration must safeguard their labor markets. The Developing-8 (D-8) is an alliance of economic cooperation including Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey, all of which are among the world’s largest labor-abundant countries but have insufficient attention toward labor market policies, especially in gender roles. This issue motivated this study, which aims to investigate the impact of economic complexity on trade through with the interaction of gender equality.Design/methodology/approachThe annual data for the panel of D-8 countries from 1990 to 2020 were collected. The Driscoll and Kraay (D-K) regression was employed for empirical investigation after observing the presence of autocorrelation, heteroscedasticity and cross-sectional dependency (CSD) across the sample.FindingsFindings show that the economic complexity index (ECI) and gender equality (GE) have a significant impact on trade openness (TO). Moreover, the interaction of GE and ECI strengthens the relationship between ECI and TO. Therefore, both factors worked together to enhance the trading system by supplying the nation with highly sophisticated and complex products.Research limitations/implicationsPolicymakers in D-8 countries should enable equal access to resources, investment and decision-making for both men and women. This leads toward stubble, innovative and complex products that enhance trade and goodwill in the international market.Originality/valueThis study incorporated GE as an interaction term in economic complexity and TO in D-8 countries for the first time, to the best of the authors' knowledge.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2023-0908

The Dynamics of Indian Labour: Ramifications for Future of Work and Sustainability

The labour market is complex to systematise into a well-behaved structure. Here, we attempt to understand the synergy between actors and institutions in the Indian labour market and to reveal the implications for the future of work and sustainability. Combining aggregated and micro-level data from multiple sources, we examine the indicators regarding the macro economy, production and engagement in firms, and changes in the occupational structure of workers. While the familiar narrative of technology–labour acrimony emerges, it is weak. In contrast, the tie between economy and technology is a favourable representation of the proximity between human capital and technology. Inadequate human capital implies chances of non-absorption in employment, especially in the future, even for a labour-abundant country such as India. While labour market flexibility through tripartite contact work does not directly relate to labour productivity, high-wage blue-collar work is a more promising factor that aligns with productivity. On the sustainability front, upgrading environmental standards results in more cohesion between labour and capital. The conventional logic of substitutability between capital and labour is invalid when firms adopt environmental standards. From a policy vantage, the scenarios of sustainability transition to cleaner technologies and decent work require complementarity between capital and labour. Considering the dimension of upgrading in order to transition towards sustainability is an essential factor for understanding the future of work.

Intertemporal and cross-sectional contrasts in effects of trade: Significance of the technology content of exports

This study identifies cross-country and intertemporal differences in the effects of trade exposure on per capita national income. We develop a small open economy endogenous growth model with high- and low-technology sectors and endogenous human capital accumulation. We then test the predictions of our model on a sample of 70 countries over the period 1980–2017. Our main assertion is that gains from trade are not only disproportionate across countries but also contrasting over time, depending on the technology intensity of exports. Countries with lower initial experience in the production of technology-intensive goods and services tend to specialize in sectors with lower demand for better-educated and high-skilled workforce, which lowers the return to and individual incentives for education. Consequently, trade-induced specialization patterns, due to their implications about technological progress, appear to be an important factor causing cross-national divergence in welfare. Our theoretical model implies that, in an unskilled labor-abundant country, higher exposure to international trade can decrease the long-run growth rate, even though it increases short-run per capita income. In a skilled-labor abundant country, both short-run and long-run effects are positive. Our empirical findings, which identify short-run and long-run effects separately, strongly support these predictions.

Do developing countries gain by participating in global value chains? Evidence from India

Is it in the interest of a developing country to promote strong local linkages for domestic industries or to participate in global value chains (GVCs) wherein linkages are globally dispersed? This paper informs this debate by empirically analyzing which one of these strategies would result in higher levels of domestic value added (DVA) and employment in India. Using a unique panel data on DVA and jobs tied to Indian exports from 112 sectors for the period 1999–2000 to 2012–2013, we show that greater backward GVC participation—use of imported inputs to produce for exports—leads to higher absolute levels of gross exports, DVA and employment. This result implies that labor abundant countries can reap dividends by adopting policies aimed at strengthening their backward participation in GVCs. Our findings are robust to various estimation techniques and instrumental variable approaches to address potential endogeneity concerns.Supplementary InformationThe online version contains supplementary material available at 10.1007/s10290-021-00452-z.

Ageing and Welfare State Policy: A Macroeconomic Perspective

It has been widely recognized that population ageing could generate structural changes centered around a dwindling labor force, on one hand, and an expanding dependency on the generosity of the welfare state, on the other hand. Welfare state policy related to population ageing entails both fiscal and migration issues. This paper employs a general-equilibrium model with a policy making focus to help illuminate the mechanisms governing social benefit provision, labor income taxation, capital income taxation, and migration curbs on low-skilled and high-skilled workers, all driven by population ageing. Greater generosity of the welfare state comes together with a more liberal migration policy when incentives are compatible with the interests of the majority of voters. The effects of ageing on the tax and benefit sides of the welfare state depend on the number of dependents in the population and whether the country is a capital importer (in which case the capital tax burden is shared with foreigners) or a capital exporter (in which case the age-related wage increase skews taxation towards labor income). The tax-benefit narraive is about factor supplies. Low ageing evolution correlates with a relatively labor-abundant country (low retirement), which turns into a labor-scarce country (high retirement). Parallel to the evolution of the labor force, a country that is a capital importer (with a high rate of return) becomes a capital exporter (with a low rate of return). Greater demand for social benefits from an ageing population is balanced against the rising costs of labor income taxation and capital income taxation.

Utilitarianism or cosmopolitanism? A study of education’s impact on individual attitudes toward foreign countries

ABSTRACT This article attempts to study two different causal mechanisms where education affects individual attitudes toward foreign countries. On the one hand, education stands for human capital and/or skill level. According to the factor endowments model, for example, well-educated people in a capital-abundant country can materially benefit from trade ties with other labor-abundant countries. On the other hand, education cultivates social trust, disseminates information, and expands breadth of social perspective, all of which can make one more pro-outsider. Hence, both explanations tend to predict that one’s educational attainment is associated with a positive opinion of outgroup members and foreigners. By cross-national comparison including both developed and developing economies, I find empirical evidence supporting the socializing not the utilitarian effect of education on outgroup attitudes, using data from the second wave of the Asian Barometer Survey. Further structural equation modeling shows that education socializes an individual to be more internationalist and cosmopolitan mainly through an expanded social perspective.

Foreign Direct Investment in the Readymade Garment Sector of Bangladesh: Macro and Distributional Implications

Bangladesh, a labour-abundant country, benefits from foreign direct investment (FDI), as it is considered to be a supplement to domestic investment for this capital-scarce economy. This paper measures the impacts of an FDI increase in the RMG sector on the macroeconomy in Bangladesh and on the welfare of households, which are heterogeneous, especially in income sources, using a general equilibrium framework. Simulation results show that an increase in FDI promotes both output and exports in the RMG sector. However, because of the competition between MNEs and domestic firms, the output of domestic firms would fall slightly. Scrutinizing the welfare effects among household groups, we find that the benefits of FDI-induced growth would affect all household groups unevenly. We also demonstrate that the benefits could be shared equitably among household groups with skill development programmes targeted at the adversely affected household groups.

On Trade, Distributional Conflict, and Endogenous Regime Change

Can we expect shocks in trade openness to affect the quality of the domestic political process, and in what way? Isolating cross-country heterogeneity in the distributional effects of trade shocks for different relative factor endowments as a critical element for theory development, the paper tackles the puzzle by formally developing and solving a new probabilistic model to link the distributional effects of shocks to endogenous institutional change via induced conflict between a capital-intensive and a labour-intensive coalition. The model of distributional conflict combines a political selection stage to select the rate of income redistribution by majority voting and a constitutional conflict stage among factor-intensive coalitions whose steady state outcome determines the level of institutional inequality assigning the “rules“ of political selection. The former is modelled via a canonical weighted median voter setup with the (infinitely many) weights-distributions induced by the value of the steady state outcome of the constitutional conflict stage, while the latter is modelled as a Tullock contest with an endogenous contest success function and the heterogeneous coalition prizes equalling the expected value of the contest to each coalition as a function of the coalitions' efforts. Closed form solutions are derived for (i) the expected outcome of distributional conflict in terms of institutional quality and (ii) the intensity of conflict. Via comparative static analysis based on the Stolper Samuelson theorem in Heckscher-Ohlin trade theory, it is formally shown that positive shocks in trade openness always induce higher institutional inequality irrespective of heterogeneity in the underlying distributional effects, but that the expected mechanisms driving the drop in quality differ across capital-abundant and labour-abundant countries.

Trade-induced Unemployment in Labor-abundant and Capital-abundant OIC Countries: Asymmetric Evidence from Quantile-on-Quantile Regression

This study aims to analyze the impact of trade openness on unemployment in labor-abundant and capital-abundant countries of Organization of Islamic Cooperation (OIC) by taking the data from 1991 to 2018. A new technique quantile-on-quantile (QQ) is applied to show how quantiles of trade openness asymmetrically affect the quantiles of unemployment by providing an appropriate framework to capture the overall dependence structure. 8 out of 10 capital-abundant countries show a positive association between trade openness and unemployment, while 7 out of 10 labor-abundant countries indicate a negative effect of trade openness on unemployment. Hence, the majority of selected labor-abundant and capital-abundant countries are validating Heckscher-Ohlin theory of international trade. The results show that the asymmetric intensity of trade-induced unemployment varies with countries at both bottom and upper quantiles of the distribution of data that require individual attention in postulating the policies related to trade and unemployment in OIC countries.

The effects of labor regulation on firms and exports: Evidence from Indian apparel manufacturing

We examine the impact of labor regulations on firm outcomes and explore their differential effects on exporters. Building on a conceptual framework developed from standard theory and a detailed qualitative study of India's apparel industry, our econometric analysis exploits establishment-level data on formal Indian garment manufacturers between 2009-10 and 2013-14 and interstate variation in labor laws. We find a close fit between the implications of our conceptual framework, the qualitative evidence and the data. Apparel producers in states with pro-worker labor regulations tend to replace labor with capital. This choice of technique effect is smaller for exporting firms, which are more tightly bound to norms for organizing production in global supply chains. Pro-worker labor regulations also reduce output levels more for exporters than for non-exporters, consistent with exporters being bound to international pricing norms. Labor regulations thus have a particularly adverse impact on exporters. Our findings underscore the cost of poorly-designed and implemented labor regulations in a labor-abundant country wishing to spur exports, employment and industrial activity in labor-intensive industries.

TRENDS OF INTERNATIONAL LABOR MIGRATION IN THE MODERN LABOR MARKET

In recent decades, the impact of international migration on world economic and political processes has increased significantly. Today, international labor migration of the population is one of the most important components of modern processes in the world economy, along with its other components, such as the movement of capital, goods, technologies and information. The globalization of the world economy has led to the emergence of new trends in the processes associated with the international migration of labor, requiring scientific study. The article deals with the modern processes of international labor migration. Methods of statistical analysis, analysis of domestic and foreign scientific literature, synthesis of the data obtained are used. The main trends of international labor migration are investigated, such as the increase in the demographic significance of international migration in the demographic development of economically developed countries, the growth of illegal migration, the increase in the composition of migration flows of highly qualified workers and the share of women in the number of international migrants. The article analyzes the economic consequences of the impact of international labor migration on the economies of exporting countries and importing countries of labor resources. International labor migration confirms the fact that countries are dependent on each other. Thus, the negative economic and political changes taking place in the country only negatively affect the flow of international migration. International migration is dependent on scientific and technological progress and the degree of development of transnational corporations, which together create the prerequisites for the free movement of labor from one country to another. Application area. Analysis of flows of international migration confirms the need for countries to work in the field of international law to resolve issues of movement of labor, especially taking into account contemporary world problems. The globalization of the world economy at the present stage has led to the emergence of new trends in the processes associated with the international migration of labor. They are associated with the globalization of world migration flows and the involvement of the population of most countries in this process; an increase in the demographic importance of international migration in the demographic development of economically developed countries; the growth of illegal migration; an increase in the composition of migration flows of highly qualified workers; an increase in forced migration and an increase in the proportion of women in the number of international migrants. The main factor of international labor migration, which has a significant impact on the economies of the countries of origin of migrants, is the flows of migrant remittances, which make a significant contribution to the GDP of countries exporting labor resources, are a valuable source of foreign exchange for governments and play a role in stabilizing the current account of the payment balance. The second most important factor is the positive impact of workers leaving labor markets in labor-abundant countries, since workers leaving abroad reduce unemployment, improve the labor market, and reduce social tensions in the country.

Factor Abundance and Export Competitiveness: Hecksher-Ohlin (H-O) Theorem for Philippines and Japan Trade

This paper empirically examined the validity of Hecksher-Ohlin theorem in the context of the Philippine-Japan inter-industry trade. Specifically, this study tried to validate whether Japan and the Philippines are primarily exporting their relatively abundant factor and importing their scarce inputs as predicted by the H-O theorem. The question of whether factor abundance affects specialization of export trade was also addressed in this study. This study employed the Leontief’s test for H-O theorem with the addition of multiple regression time-series analysis for further validation of the test. Based on the data collected, with actual counts of the labor force in total and disaggregated, it is found that Japan relatively has an abundance of labor than the Philippines. Arguably, using the measurement of factor abundance established by Leontief and other researchers (share of supply of effective factor/share of world GDP), the result show that Japan is scarce in labor, which the Philippines is abundant. This result validates the assumption that the Philippines, as a labor abundant country relative to Japan, can export labor intensive products. In contrast, because Japan is found in this study to be a capital abundant country relative to Philippines, can export capital intensive products. Trading of these two countries using their abundant factor endowment likely provides competitive price in the international market hence could lead to export competitiveness. Furthermore, results from the Vector Error Correction Model (VECM) suggest that there is a long-run causality running from the Philippines’ labor supply and capital supply to its capacity to export merchandise products to Japan, hence enhancing efficiency on the utilization of these factor endowments could significantly improve export performance of the country that will ultimately achieve continuous increase in economic growth for the Philippines.

Offshoring and skill-upgrading in French manufacturing

Using French manufacturing firm-level data for the years 1996–2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms (“non-importers”) obtain most of their inputs domestically. (ii) Medium-productivity firms offshore skill-intensive inputs to skill-abundant countries and are more labor intensive in their domestic production than non-importers. (iii) Higher-productivity firms additionally offshore labor-intensive inputs to labor-abundant countries and are more skill intensive than non-importers. We develop a model in which heterogeneous firms, subject to fixed costs, can offshore intermediate inputs of different skill intensities to countries with different skill abundance. This leads to endogenous within-industry variation in domestic skill intensities. We provide econometric evidence supporting the factor-proportions channel through which reductions in offshoring costs to labor-abundant countries have significantly increased firm-level skill intensities of French manufacturers.

Productivity enhancing trade through local fragmentation

Abstact Mechanisms linking trade and productivity are rarely discussed in well accepted trade-theoretic literature although such a link is critical especially for understanding how trade helps developing countries. We restructure the standard neo-classical model of trade to provide a clear mechanism that leads to productivity enhancement in the export sector. As trade in labor-abundant countries reduces the real return to capital due to Stolper-Samuelson hypothesis, entrepreneurs find it easier to establish new businesses as capital costs decline. A section of workers becomes entrepreneurs producing and supplying cheaper intermediate goods to the export sector. Expanding export sector helps such a process, whereas contracting import-competing sector does not. New entrepreneurs boost the productivity of the export sector by supplying low-cost input. Here a boost in entrepreneurship induced by a decline in capital cost increases productivity of the export sector. Thus, this paper establishes a different and novel link between trade and productivity.

What Do You Fear? Anti-immigrant Sentiment in Latin America

In this article, we study the material determinants of anti-immigrant sentiment in Latin America. Based on new data on immigration to non-Organisation for Economic Co-operation and Development (OECD) countries, we use the workhorse distributive theories that anticipate who wins and who loses from immigration and test their predictive capacity in labor-abundant countries. We exploit the variation in regional immigration rates, in the skill composition of natives versus migrants, and in the relative generosity of Latin American welfare states. We find that fears of labor-market competition are weak predictors of anti-immigrant sentiment. In contrast, fears of greater tax burdens are strong and robust predictors of anti-immigrant sentiment. We conclude that studying Latin American public opinion opens new avenues for theorizing about anti-immigrant sentiment in developing countries.

What Do You Fear? Anti-immigrant Sentiment in Latin America

In this article, we study the material determinants of anti-immigrant sentiment in Latin America. Based on new data on immigration to non-Organisation for Economic Co-operation and Development (OECD) countries, we use the workhorse distributive theories that anticipate who wins and who loses from immigration and test their predictive capacity in labor-abundant countries. We exploit the variation in regional immigration rates, in the skill composition of natives versus migrants, and in the relative generosity of Latin American welfare states. We find that fears of labor-market competition are weak predictors of anti-immigrant sentiment. In contrast, fears of greater tax burdens are strong and robust predictors of anti-immigrant sentiment. We conclude that studying Latin American public opinion opens new avenues for theorizing about anti-immigrant sentiment in developing countries.

Analyzing Short-Run and Long-Run Causality between FDI Inflows, Labor Productivity and Education in Pakistan

This study empirically analyzes the causal relationship between FDI inflows, labor productivity and education in case of Pakistan using time series data from 1971-2016. The present study concentrates only on labor productivity since Pakistan is a labor abundant country where provision of education is solely the responsibility of Government of Pakistan. For empirical analysis, it uses the latest test for measuring causality i.e., Breitung-Candelon Granger Causality test in frequency domain (both old and new versions). The traditional approach of Johansen Cointegration test has also been applied to check robustness of results. Both versions of BC test, i.e., Breitung and Candelon (2006) and Breitung and Schreiber (2016) suggest a univariate causality running from FDI to labor productivity only, whereas Johansen Cointegration approach suggests a long run relationship among three variables. Therefore government of Pakistan must give proper attention to education sector in order to gain maximum benefits from FDI inflows.

Public infrastructure for production and international trade in a small open economy: a dynamic analysis

This paper develops a dynamic trade model with a stock of public infrastructure, which has a property of “unpaid factor of production”. We show that a country with a smaller (larger) labor endowment tends to become an exporter of a good whose productivity is more (less) sensitive to the stock of public infrastructure. We also show that after the opening of trade, the labor-scarce country becomes unambiguously better off but the labor-abundant country may become worse off. Overall, these results contrasts with those obtained in the case of public intermediate goods with a “creation of atmosphere” property.

Optimal Trade Policy, Equilibrium Unemployment and Labor Market Inefficiency

Why do politicians advocate trade protections to save domestic jobs when neoclassical trade models suggest that small open economies should implement free trade? The novel insight of this paper is that trade protections can be rationalized as a second-best policy that improves the domestic welfare when the equilibrium unemployment is different from the constrain-efficient unemployment. To understand the puzzle, we incorporate a Diamond-Mortensen-Pissarides frictional labor market into the standard Heckscher-Ohlin model of international trade. The model offers various findings. First, when the relative price of the labor (capital)-intensive good increases, equilibrium unemployment decreases (increases). Second, the labor market in a competitive equilibrium is constrained-efficient when the Hosios condition is satisfied. Third, a capital-abundant country with inefficiently high unemployment may experience welfare losses from trade. Conditional on having the same observed trade share, a labor-abundant country with inefficiently high unemployment have an extra welfare gain from international trade that is not present in traditional models without equilibrium unemployment. Finally, when the la- bor market in a small open economy generates inefficiently high equilibrium unemployment, the optimal trade policy is to raise the domestic price of its labor-intensive goods (an import tariff in a capital-abundant country and an export subsidy in a labor-abundant country). Free trade is optimal only when a labor market is initially efficient. The model predictions are sup- ported by patterns of tariffs in WTO member countries.

Impact of Trade vs. Non-trade Policies on the Incidence of Child Labour

The use of child labour has been widespread across developing nations. Although the incidence of child labour use has declined in recent years in the aggregate, its use has remained been quite widespread in different developing nations. Various policy interventions have been suggested and debated in international bodies to combat or reduce the incidence of child labour use in different activities in poor labour abundant countries. The present article develops a general equilibrium framework consisting of two sectors and three factors of production to investigate the efficacy of trade and non-trade policies on the incidence of child labour use and finds that although trade policy is ineffective in eradicating child labour, the use of non-trade policy is quite effective in this context.