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The Structural Dynamics of Income Distribution:Technology, Wages and Profits

Andrea Coveri () and Mario Pianta ()

No 1901, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: In the last four decades, an increasingly skewed income distribution has favored capital at the expense of labour and has been coupled with ever growing inequalities. Merging a Neo-Schumpeterian approach to innovation with a Post-Keynesian theoretical framework, this work contributes to the analysis of the structural determinants of functional income distribution. Building on Pianta and Tancioni (2008), we propose a simultaneous model on wage and profit dynamics identifying technological change, offshoring strategies and role of trade unions as key factors which shape the power relations between capital and labour. On the empirical ground, we perform an industry-level analysis extending and improving the Sectoral Innovation Database (SID), which accounts for 38 manufacturing and service sectors for six major European countries (France, Germany, Italy,Netherlands, Spain and United Kindgom) from 1994 to 2014. We find that, despite the structural asymmetries between industries? patterns of evolution, labour productivity growth and product innovation have a positive impact on both distributive components, while a rather negative effect of process innovation on wages is detected. Offshoring processes generally emerge as profit-enhancing while represent a reliable firms? weapon to reduce labour costs, although a remarkable heterogeneity arises when the technological nature of offshoring strategies is accounted for; finally, union density tends to be positively associated with wage dynamics, suggesting the relevance of labour market institutions in conditioning the patterns of income distribution.

Keywords: Distribution; innovation; offshoring; union density; Europe; industries. (search for similar items in EconPapers)
JEL-codes: F12 F15 J31 J51 L16 L6 L8 O33 O52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-hme, nep-ino, nep-lab, nep-pke and nep-tid
Date: 2019, Revised 2019
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http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_19_01.pdf First version, 2019 (application/pdf)

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