Is There a Long-run Association between Globalization and Labor Productivity?: Panel Evidence from OECD Countries

Globalization may have various effects in both positive and negative contexts in an economy. By letting a country to reach more advanced technologies and production methods, globalization can augment an economy’s productivity level. Therefore, this study examines the role of globalization on labor productivity in both short-run and long-run. In order to analyze this association, we empirically investigate if there is a long-run relationship between globalization and labor productivity by using a balanced panel data of 34 OECD countries for the years from 2002 to 2012. Panel cointegration test results disclose that globalization and labor productivity are positively related to each other and this relationship is statistically significant in both short-run and long-run. According to the estimation results, if globalization index value goes up by 1% then labor productivity increases by 0.83% in the long-run while this figure is by 0.44% in the short-run. Also, we could not find any causality association between globalization and labor productivity as a result of panel causality test