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Labor shares in the old and new EU member states - Sectoral effects and the role of relative prices

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  • Kónya, István
  • Krekó, Judit
  • Oblath, Gábor

Abstract

The paper studies the labor share among countries of the European Union, with a particular attention to the newer member states of Central and Eastern Europe (CEEU). We find that CEEU countries typically have lower labor shares than older EU member states, both in the aggregate and at the sectoral level. Structural change, while quite pronounced among the CEEU economies, plays only a minor role in the evolution of the labor share. The exception is agriculture, which for some countries has a sizable impact on the level and dynamics of the labor share - partly because of important measurement problems. We also find that a significant part of the difference in conventionally measured labor shares between the more developed EU countries and less developed CEEU countries can be attributed to differences in relative prices. This is consistent with a productivity-based explanation: we show that a simple, calibrated two-sector model with sectoral productivity differentials can explain 36–71% of cross-country variations in the non-agricultural labor share.

Suggested Citation

  • Kónya, István & Krekó, Judit & Oblath, Gábor, 2020. "Labor shares in the old and new EU member states - Sectoral effects and the role of relative prices," Economic Modelling, Elsevier, vol. 90(C), pages 254-272.
    • Handle: RePEc:eee:ecmode:v:90:y:2020:i:c:p:254-272
    DOI: 10.1016/j.econmod.2020.05.010
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    Cited by:

    1. Song, Eunbi, 2021. "What drives labor share change? Evidence from Korean industries," Economic Modelling, Elsevier, vol. 94(C), pages 370-385.
    2. Xiao, De & Yu, Fan & Guo, Chenhao, 2023. "The impact of China's pilot carbon ETS on the labor income share: Based on an empirical method of combining PSM with staggered DID," Energy Economics, Elsevier, vol. 124(C).
    3. Hubert Drazkowski & Sebastian Zalas, 2023. "The evolution of labor share in Poland. New evidence from firm-level data," GRAPE Working Papers 82, GRAPE Group for Research in Applied Economics.
    4. Kónya, István & Oblath, Gábor & Krekó, Judit, 2021. "A bérhányad alakulása Magyarországon és Európában [The labour share in Hungary and Europe]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1021-1054.
    5. Anatolijs Prohorovs & Julija Bistrova, 2022. "Labour Share Convergence in the European Union," Economies, MDPI, vol. 10(9), pages 1-21, August.
    6. Sebastian Zalas & Hubert Drążkowski, 2023. "The Evolution of the Labour Share in Poland: New Evidence from Firm-Level Data," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 13-33.

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    More about this item

    Keywords

    Labor share; Labor productivity; Relative prices; European Union;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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