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Privatization, Entry Regulation and the Decline of Labor's Share of GDP: A Cross-Country Analysis of the Network Industries

Ghazala Azmat (), Alan Manning () and John van Reenen ()

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Labor's share of GDP in most OECD countries has declined over the last two decades. Some authors have suggested that these changes are linked to deregulation of product and labor markets. To examine this we focus on a large quasi-experiment in the OECD: the privatization of many network industries (e.g. telecommunications and utilities). We present a model with agency problems, imperfect product market competition and worker bargaining which makes clear predictions on how the labor share, employment and wages respond to privatization and other regulatory changes. We exploit cross-country panel data on several network industries and find that privatization can account for a significant proportion of the fall of labor's share (a fifth overall, but over half in Britain and France). The impact of privatization has been offset by falling barriers to entry, which consistent with theory, dampens profit margins.

Keywords: Profit share; Wages; Privatization; Entry Regulation (search for similar items in EconPapers)
JEL-codes: E25 E22 E24 L32 L33 J30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mac and nep-reg
Date: 2007-06
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Working Paper: Privatization, Entry Regulation and the Decline of Labour's Share of GDP: A Cross-Country Analysis of the Network Industries (2007) Downloads
Working Paper: Privatization, entry regulation and the decline of labor's share of GDP: a cross-country analysis of the network industries (2007) Downloads
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