The impact of labor share on economic growth: a panel data analysis for European Union

José Alves, Francisco Baptista and José Coelho

No 2024/0319, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: A panel data analysis was conducted for European Union (EU) countries spanning from 1995 to 2019 to gain insights into the impact of labor share on economic growth. The primary objective was to ascertain whether labor share actually remains less influential than capital share on economic growth, or if the changing landscape over the years necessitates a policy adjustment for optimizing economic growth. Notably, wage share exhibits a positive influence on economic growth when it experiences positive growth and when is higher than growth of total factor productivity. These results challenge conventional wisdom and suggest that economic policies may need to adapt to the evolving dynamics of labor share and its impact on growth.

Keywords: economic growth; labor share; total factor productivity; first-differences Generalized Method of Moments. (search for similar items in EconPapers)
JEL-codes: C23 E24 O47 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-eec and nep-eff
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