MINIMUM WAGE AND MANUFACTURING LABOR SHARE: EVIDENCE FROM NORTH MACEDONIA

Marjan Petreski () and Jaakko Pehkonen ()
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Jaakko Pehkonen: University of Jyvaskyla, Finland

Economic Thought and Practice, 2024, vol. 33, issue 2, 377-402

Abstract: The objective of the paper is to understand whether the minimum wage plays a role in the labor share in the manufacturing sector in North Macedonia. We decompose the movements of the labor share into those along a share-capital curve, shifts of this locus, and deviations from it. We use the capital-output ratio, total factor productivity and input prices to capture these factors, while the minimum wage is introduced as an element that shifts the curve. We estimate a panel of 20 manufacturing branches over the period 2012-2019 with FE, IV and system-GMM estimators. We find that the role of the minimum wage for the labor share is industry-specific. In labor-intensive and low-paid industries, it increases workers’ labor share, which corresponds to a complementarity between capital and labor. For capital-intensive branches, it reduces labor share, likely through the job loss channel and along a substitutability between labor and capital. This applies to both branches where foreign investment and heavy industry are integrated.

Keywords: labor share; capital endowment; minimum wage; North Macedonia (search for similar items in EconPapers)
JEL-codes: J31 J38 J52 L25 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Minimum wage and manufacturing labor share: Evidence from North Macedonia (2023)
Working Paper: Minimum wage and manufacturing labor share: Evidence from North Macedonia (2022)
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DOI: 10.17818/EMIP/2024/2.2

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