Wage share and labor productivity: empirical evidence from OECD countries

Marco Amendola () and Francesco Ruggeri ()

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: This paper empirically examines the relationship between functional income distribution and labor productivity. In particular, it tests the hypothesis that a higher wage share promotes productivity growth by pushing firms to invest and innovate in order to preserve profit margins. Using panel data for OECD countries, the results provide strong support for this mechanism: increases in the wage share are associated with significantly higher labor productivity growth. The magnitude of the effect suggests that the contraction of wage shares in many advanced economies may explain an important part of their recent productivity slowdown. The analysis further shows that this positive link operates primarily through capital deepening, consistent with the view that wage pressures incentivize investment in laborsaving technologies. By contrast, no robust relationship is found between the wage share and Total Factor Productivity.

Keywords: Labor productivity; Wage share; Productivity slowdown; Capital deepening; Induced technical change Jel Classification: C23 E25 D33 O30 (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-eff, nep-lma and nep-tid
References: Add references at CitEc
Citations:

Downloads: (external link)
http://repec.deps.unisi.it/quaderni/935.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:usi:wpaper:935

Access Statistics for this paper

More papers in Department of Economics University of Siena from Department of Economics, University of Siena Contact information at EDIRC.
Bibliographic data for series maintained by Fabrizio Becatti ().