Macroeconomic Determinants of the Labour Share of Income: Evidence from OECD Economies
The study investigates the relationships between the labour share of income and several macroeconomic variables – the GDP growth, inflation, unemployment, as well as GDP gap and capacity utilization – in industrialised economies between 1960 and the 2010s. Three complementary hypotheses that relate...
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| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
Kolej Yayasan Saad & UNIMAS
2018
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| Subjects: | |
| Online Access: | http://ir.unimas.my/id/eprint/33187/1/Nazaria.pdf http://ir.unimas.my/id/eprint/33187/ https://mpra.ub.uni-muenchen.de/85597/ |
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| Summary: | The study investigates the relationships between the labour share of income and several macroeconomic variables – the GDP growth, inflation, unemployment, as well as GDP gap and capacity utilization – in industrialised economies between 1960 and the 2010s. Three complementary hypotheses that relate macroeconomic determinants to the labour share dynamics are considered: 'overhead labour' hypothesis, 'realization theory/wage lag' hypothesis and the 'rising strength of labour' hypothesis. The study employs a sequential procedure: testing for the stationarity properties of the variables, using bounds test to identify the presence of cointegrating relationships, and estimating long-run relationships using ARDL or OLS methods. The results show that all three hypotheses are supported only in a limited number of economies, whilst in the majority of cases only certain relationships are prominent. On the whole, the GDP growth rate, the unemployment rate, and to a smaller extent capacity are found to be the principal determinants of the labour share, while change in the level of prices is of subsidiary importance.
Keywords: labour share; time series; macroeconomic determinants |
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