Productive knowledge, economic sophistication, and labor share

Imran Arif

World Development, 2021, vol. 139, issue C

Abstract: We present economic sophistication, the ability to produce complex products, as a potential determinant of labor share. Economic sophistication requires specific skills and tacit knowledge embedded in labor. It increases the bargaining power of workers, resulting in a higher labor share. We are the first to present economic sophistication as a potential determinant of labor share. We employ a fixed-effect model using panel data from 98 countries observed from 1970–2015 to find that economic sophistication has a positive and statistically significant effect on labor share. This positive effect applies to both OECD and non-OECD countries. A one standard deviation increase in economic sophistication increases labor share by about 3 percent, which corresponds to about 1.6 percentage points increase relative to the mean. Further, we show that economic sophistication and human capital have a substantial interaction effect that varies across OECD and non-OECD countries.

Keywords: Labor share; Economic sophistication; Distribution of income (search for similar items in EconPapers)
JEL-codes: D24 D33 E25 F10 F60 O15 O50 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0305750X20304307
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:139:y:2021:i:c:s0305750x20304307

DOI: 10.1016/j.worlddev.2020.105303

Access Statistics for this article

World Development is currently edited by O. T. Coomes

More articles in World Development from Elsevier
Bibliographic data for series maintained by Catherine Liu ().