Labour shares, employment protection and unions in European economies

Abstract

We analyse the role that the liberalisation of temporary contracts plays in labour share in some EU countries. The empirical analysis mainly relies on the EUKLEMS database and applies a difference-indifference approach. Our results, focused on periods of different length (1996-2007 and 1996-2013), show that legislative innovations that favour the extensive use of temporary contracts negatively affect the labour share, likely because they lower employees' average compensations. We hypothesize that these labour reforms, which lead to enduring skill deficits and job instability, have influenced the functional distribution of income, thus failing to halt the erosion of the labour share of previous decades.

Firm strategies and distributional dynamics: labour share in Italian medium-large firms

“…Shifting the focus to institutional factors, results highlight that the share of union members is positively associated with the labour share along the entire distribution and both in 2010 and in 2015 in line with previous empirical findings (see for European industries, Damiani et al 2018 andfor US, Young andZuleta 2018). Union density-measured as number of trade union members as a percentage of total employees or as a percentage of total employment-has often been linked to workers' bargaining power, affecting their ability to negotiate a larger share of productivity growth as labour compensation (OECD 2015).…”

“…Focusing on empirical studies on the labour share, a major distinction concerns the level of the analysis. Many empirical studies are based on country data (see, e.g., Checchi and Garcia-Peñalosa 2010; Hogrefe and Kappler 2013; Young and Lawson 2014;Damiani et al 2018;Young and Tackett 2018). Some studies use industrylevel data (Azmat et al 2012;Hutchinson and Persyn 2012;Elsby et al 2013;Alvarez-Cuadrado et al 2018;Pianta and Tancioni 2008;Bogliacino et al 2017;Young and Zuleta 2018).…”

“…From a country-level perspective, Damiani et al (2018) analyze the role of the liberalization of temporary contracts in some EU countries detecting a strong negative relationship between legislations favoring the extensive use of temporary contracts and the labour share. The diffusion of temporary contracts modifies the nature of employment relations making more difficult for trade unions to recruit members and therefore leading to labour share compression (OECD 2012).…”

The Long‐Run Dynamics of the Labor Share in Japan

“…As for union density our results are substantially new, as the majority of the empirical literature found no significant effects of unionization on the labor share (e.g. Checchi and Garcia-Penalosa, 2008;Elsby et al, 2013) or, in some specifications, a positive impact (Damiani et al, 2018). As we discuss in the following sections, our evidence might be explained by the specific features and evolution of the Japanese labor market institutional structure.…”

“…Ciminelli et al (2018), for 26 advanced economies over the period 1970–2015, report a statistically significant, economically large and robust negative effect of regular work deregulation on the labor share. Damiani et al (2018) show that, for a sample of 9 EU countries (12 market services), legislative innovations favoring the extensive use of temporary contracts negatively affect the labor share. As for union density our results are substantially new, as the majority of the empirical literature found no significant effects of unionization on the labor share (e.g.…”