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Higher education, employers' monopsony power and the labour share in OECD countries

Emilie Daudey () and Bruno Decreuse
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Emilie Daudey: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the impact of higher education on the labour share. It is based on the following idea: as education offers adaptability skills, it should reduce employers' monopsony power and, therefore, increase the labour share. This idea is developed in a two-sector model with search unemployment and wage competition between employers to attract/keep workers. Using panel data for eleven OECD countries, we show that the proportion of higher educated in the population hasa significant positive effect on the labour share: typically, an increase of one standard deviation inhigher education induces a three point increase in the labour share. The other determinants of the labour share are compatible with the theoretical model. They include the capital-output ratio (-), minimum to median wage ratio (+), union density (+). We also find that the unemployment rate has a negative and significant impact on the labour share, which, together with the positive impact of higher education, is incompatible with a three-factor model where factors are paid their marginal products.

Keywords: Search frictions; Adaptability; Labour share; Macroeconomic panel data (search for similar items in EconPapers)
Date: 2006
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00409674
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Citations: View citations in EconPapers (11)

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