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The political economy of income distribution: industry level evidence from 14 OECD countries

Alexander Guschanski () and Ozlem Onaran ()

No 17518, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: This article presents an econometric estimation of the determinants of the wage share, using sectoral data for 14 OECD countries for the period 1970- 2014. We present estimations for the wage share of high- and low-skilled workers and within manufacturing and service industries. We augment sectoral data with input-output tables and union density data to obtain detailed estimations of the effect of technological change, globalisation and bargaining power on the wage share. We find a significant negative effect of globalisation and we discover offshoring to emerging markets to be a robust driver of this process. Technological change had an impact which differs by skill group, but theoretical issues and lack of robustness of the results cast doubt on the hypothesis of skill-biased technological change as a key factor in the overall decline in the wage share. Furthermore, we find a robust effect of institutional factors such as union density and minimum wages on the wage share, lending strong support to the political economy approach to functional income distribution.

Keywords: wage share; income distribution; union density; technology; offshoring (search for similar items in EconPapers)
JEL-codes: E25 F66 J50 (search for similar items in EconPapers)
Date: 2017-07-31
New Economics Papers: this item is included in nep-eec, nep-hme and nep-pol
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