Determinants of the wage share: a cross-country comparison using sectoral data
Alexander Guschanski () and
Ozlem Onaran ()
No 15847, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre
There has been a significant decline in the share of wages in GDP in both developed and developing countries since the 1980s. This paper analyses the determinants of the wage share (labour compensation as a ratio to value added) using sectoral data with country specific estimations for selected OECD countries. We compile a comprehensive sector-level dataset of eight OECD countries (Denmark, France, Germany, Italy, Spain, Sweden, the UK, the US) for the period of 1970 to 2011, which allows us to trace the developments in the wage share across high and low skilled sectors and within manufacturing and service industries. Our findings provide new insights with regard to the drivers of falling wage share. By conducting country specific estimations, we analyse how institutional differences in industrial relations, as well as social security and welfare regimes affect the wage share. Our findings lend strong support to the political economy approach to functional income distribution. Technological change had an impact, especially in Italy, the US and for the total country sample, but the effects are not robust with respect to the use of different specifications and the wage share in most countries in our sample appears to be driven by variables reflecting the bargaining power of labour such as union density, adjusted bargaining coverage and government spending. The relevance of these variables differs considerably across countries, lending support to our approach of country specific estimations. We find that globalisation had a strong impact on the wage share in all countries. The effect of globalisation on the wage share was least strong in Denmark. In Germany, and to a lesser extent in the UK, the effect is due to outward FDI and intermediate import penetration which reflects the impact of international outsourcing practices. Intermediate imports penetrations had no significant impact in Spain while FDI played a smaller role in France and the US. Different institutional variables appear to be relevant for each country. Germany exhibits the most robust positive effect of union density on the wage share. Conversely, collective bargaining coverage, together with social government spending, plays a more important role in France, the UK and the US. Financialisation had the most pronounced effect in the UK and the US, while it appears to be also relevant in Germany. We find mixed results for the effect of personal income inequality on the wage share. However, there is indicative confirmation for a negative effect in Germany, the UK and the US.
Keywords: Wage share; income distribution; labour unions; bargaining (search for similar items in EconPapers)
JEL-codes: E25 F66 J50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-hme
References: Add references at CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
http://gala.gre.ac.uk/id/eprint/15847/1/Determinan ... 0analysis%20GPPE.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://gala.gre.ac.uk/id/eprint/15847/1/Determinants%20of%20the%20wage%20share%20-%20a%20cross-country%20analysis%20GPPE.pdf [302 Moved Temporarily]--> https://gala.gre.ac.uk/id/eprint/15847/1/Determinants%20of%20the%20wage%20share%20-%20a%20cross-country%20analysis%20GPPE.pdf)
Journal Article: Determinants of the Wage Share: A Cross-country Comparison Using Sectoral Data (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:gpe:wpaper:15847
Access Statistics for this paper
More papers in Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre Contact information at EDIRC.
Bibliographic data for series maintained by Nadine Edwards ().