Beschreibung:
In this paper, we explore the role of trade on the evolution of labor share in Latin American countries. We use trade agreements with large economies to capture the effect of sharp changes in trade. We apply synthetic control methods, combined with regression analysis, to estimate the average causal impact of trade agreements on labor share. While effects are heterogeneous in our eight case studies, the average impact is negative between 2 to 4 percentage points of GDP four years after the entry into force of the trade agreements. This result is robust to the specification used and to the set of countries in the donor pool. We also find that, after trade agreements, exports of manufactured goods and the share of industry to GDP increase on average. A decomposition shows that all the reduction in labor share is explained by a negative impact on real wages