Globalization and labor market institutions: International empirical evidence

A widespread concern is that labor market institutions erode in the course of globalization, which, in turn, decreases employment and wages. By using panel data and cross-sectional data, I investigate the influence of globalization on labor market regulation. I use the indicators of labor market institutions by Gwartney et al. (2012) and the KOF indices of globalization. To deal with potential reverse causality, I employ a system GMM panel estimator and use a constructed trade share as proposed by Frankel and Romer (1999) as an instrumental variable for globalization in cross-sectional models. The results do not show that globalization induced labor market deregulation.