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Labor income share and imperfectly competitive product market

Author

Listed:
  • Shim Hyein

    (Fiscal Information Research Center, Korea Public Finance Information Service, Seoul, Republic of Korea)

  • Chung Chune Young

    (School of Business Administration, Chung-Ang University, Seoul, Republic of Korea)

  • Ryu Doojin

    (Department of Economics, Sungkyunkwan University, Jongno-gu, Seoul 03063, Republic of Korea)

Abstract

This study examines the long-run determinants of the income distribution between capital and labor in the Korean market, a leading emerging market. We develop a model of a special type of oligopolistic market, controlled by a group of dominant firms, and a general oligopolistic market, with heterogeneously sized firms. This model provides empirically testable implications related to the long-run determinants of the income distribution. Using two measures of the degree of market concentration, the k-firm concentration ratio (CRk) and the Hirschman–Herfindahl index (HHI), we find a negative association between these concentration measures (CRk and HHI) and the labor income share. In addition, analyzing a unique dataset of manufacturing firms based on five- and three-digit Korean Standard Industry Classifications from 2000 to 2011, we find a significantly negative relationship between the labor income share and the market concentration, which is consistent with the implications of the model. Overall, our results suggest that building a more competitive product market environment could alleviate national income inequality.

Suggested Citation

  • Shim Hyein & Chung Chune Young & Ryu Doojin, 2018. "Labor income share and imperfectly competitive product market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-16, January.
    • Handle: RePEc:bpj:bejmac:v:18:y:2018:i:1:p:16:n:6
    DOI: 10.1515/bejm-2016-0188
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    More about this item

    Keywords

    imperfect competition; income distribution; labor income share; market concentration;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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