Union Density and Persistence of the Productivity–Pay Decoupling in OECD Countries

Guglielmo Maria Caporale, Luis Alberiko Gil-Alana and Francisco Avendaño Martínez

No 13113, CESifo Working Paper Series from CESifo

Abstract: This paper examines the long-memory properties of the labour share — the ratio of labour compensation to value added, which is a measure of the gap between real compensation and productivity — to establish whether its decline represents a temporary episode or a permanent regime shift; specifically, it estimates its order of (fractional) integration to assess its persistence. The exact local Whittle estimator is applied to estimate the (fractional) integration parameter in the case of twenty-three OECD economies; it is found that this is close to a unit root: the sample mean estimate is 1.04, or 1.01 after adjusting for the small-sample bias, with a hierarchical confidence interval of [0.88; 1.15]. Neither the unit root null nor very slow mean reversion can be rejected; this can be interpreted as evidence of distributive hysteresis — analogous to the hysteresis in unemployment described by Blanchard and Summers (1986). The analysis then focuses on identifying the dimension of union power resulting in long memory: persistence is found to decrease with union density but not with institutional protection.

Keywords: labour share; productivity-pay decoupling; fractional integration; union power; labour institutions; OECD (search for similar items in EconPapers)
JEL-codes: C22 E25 J20 J31 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_13113

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