Bargaining, Openness, and the Labor Share

Abstract

This paper investigates determinants of changes of the labor share in developed countries with a focus on Western Europe. Using a country-industry panel that covers the private sector, the paper focuses on long and short-run changes within industries. The results show a large and time-persistent impact of increasing globalization on the labor share, especially if the within-industry changes are considered. Openness seems to be the driving force for downward movements in the industry level labor shares while technological and institutional forces impact these shares positively. Furthermore, while investments into information and communication technology (ICT) increase productivity of workers, it has a negative impact on the labor share as it enables higher economic integration which lowers the labor share. Economic integration has stronger impact on the polarization in Western European labor markets than ICT.

The Labor Share Question in China

“…In addition, Berthold et al (2002) emphasizes the role of globalization on firms' substitution of capital for labor. Oyvat (2010), Schneider (2011), Hutchinson and Persyn (2012), Hogrefe and Kappler (2013) and Elsby et al (2013) confirms the negative effect of globalization with different datasets.…”

Directed Technical Change and Capital Deepening: A Reconsideration of Kaldor's Technical Progress Function

“…The requirement that a growth model should be able to account for the above stylized facts does not imply, of course, that growth is always balanced. The increase in the profit share observed over the last decades suggest otherwise and requires suitable modifications (Rodriguez and Jayadev, , Schneider, ). In this regard, the hybrid model does not differ from other models that deliver, in their elementary form, balanced growth.…”

The Structural Determinants of the Labor Share in Europe

“…ICT tends to influence labor not only through substitutability of labor with ICT and foreign work, but also through lowering rents of workers as monitoring technology improves (Schneider, 2011a). Using a country-industry panel for Western Europe Schneider (2011b) focuses on long and short-run labor share changes within industries and finds a large and time-persistent impact of increasing globalization on the labor share, especially if the withinindustry changes are considered. Openness seems to be the driving force for downward movements in the industry level labor shares while technological and institutional forces impact these shares positively.…”