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The causes of falling wage share: sectoral and firm level evidence from developed and developing countries – what have we learned?

Ozlem Onaran () and Alexander Guschanski ()

No 19373, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: The last four decades have been characterised by drastic changes in the distribution of income between wages and profits in both OECD countries and emerging economies. We have recently analysed the causes of the decline in the wage share in the developed and developing countries for a project titled ‘The causes of falling wage share and prospects for growth with equality in a globalized economy’ for the Institute of New Economic Thinking, and this paper summarizes our findings. We provide evidence that changes in bargaining power, in particular the fall in union density and welfare state retrenchment, as well as financialization and offshoring lie at the core of rising income inequality between labour and capital in both developed and developing economies. We challenge the established consensus that inequality is an unavoidable outcome of technological change or globalisation, and show the importance of labour market institutions and social protection policies.

Keywords: wage share; income distribution; union density; technology; offshoring; market concentration; financialisation (search for similar items in EconPapers)
JEL-codes: J31 (search for similar items in EconPapers)
Date: 2018-03-03
New Economics Papers: this item is included in nep-hme and nep-pke
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Handle: RePEc:gpe:wpaper:19373