Labor shares in the EU - sectoral effects and the role of relative prices

István Kónya, Judit Kreko () and Gabor Oblath ()
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Judit Kreko: Central European University and Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences
Gabor Oblath: Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences

No 1902, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: The paper studies the labor share among countries of the European Union, with a particular attention to newer member states of Central and Eastern Europe (CEEU). After discussing methodological issues in the computation of the labor share, we present various stylized facts at the country level, and also for broad sectors within the aggregate economy. We find that CEEU countries typically have lower labor shares, both in the aggregate and at the sectoral level. Structural change, while quite pronounced among the CEEU economies, plays only a minor role in the evolution of the labor share. The exception is agriculture, which for some countries have a sizable impact on the level and dynamics of the labor share - partly because of important measurement problems. We also document links between productivity, the relative prices of consumption and investment, and the labor share. In particular, we find that a significant part of the difference in conventionally measured labor shares between the more developed EU countries and less developed CEEU countries can be attributed to differences in relative prices. We discuss possible explanations, and show that given reasonable assumptions, a simple two-sector model is able to account for the main findings.

Keywords: labor share; development; labor productivity; relative prices; European Union (search for similar items in EconPapers)
JEL-codes: E24 J30 O11 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2019-01
New Economics Papers: this item is included in nep-eec and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:has:discpr:1902

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