Trade Composition and Labor Income Share: A Dynamic Panel Threshold Study Across Advanced and Emerging Countries

The decline in labor income share (LIS) is partly attributed to the rise in trade openness. However, only a few studies have examined the independent effects of exports and imports, particularly their non-linear dynamics. This study aims to address this gap by analyzing data from 76 advanced and emerging economies from 2004 to 2022. A dynamic panel threshold regression was employed to capture the non-linear effects of exports and imports on LIS while controlling for economic, social, and political factors. The results reveal a consistent negative effect of exports on LIS, which intensifies at higher levels of export activity, and a positive impact of imports that is significant primarily in emerging economies. The study contributes to policy discussions by demonstrating that trade’s distributional effects depend not just on openness levels but on the specific composition and intensity of exports versus imports. Methodologically, it advances the field by employing a threshold framework to capture these nuanced dynamics, offering a novel empirical insight into the trade–labor nexus. Consequently, these findings underscore the importance of differentiated trade strategies aimed at promoting inclusive growth, particularly in managing the labor distribution consequences of export expansion. JEL Classification F14, F16, E25