This study empirically analyzes the impact of globalization on the elasticity of demand
for labor using manufacturing data for nine OECD countries. While previous studies
focused on the relationship between trade and elasticity of demand for labor, we also
consider the effect of international capital mobility. Our main findings can be summarized
as follows. Firstly, the results confirm that increased trade has made labor demand more
elastic in Austria, Finland, France, Germany, the UK and the US. Second, financial
opening, as in the case of trade liberalization, affects labor demand, making it more elastic.
We confirm this finding for Finland, Sweden, Korea, Germany and the UK. In the case of
Finland, Germany and the UK, both trade and financial opening render labor demand
more elastic. Finally, we find that globalization has reduced the share of labor within total
revenue, possibly due to reduction in the bargaining power of workers as suggested by Rodrik
(1997).