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Wage Gaps, Factor Shares and Real Wages

In: Trade Unions, Wage Formation and Macroeconomic Stability

Author

Listed:
  • John McCallum

    (University of Quebec)

Abstract

The relationships which link real wages, capital intensity and factor shares are tested as a prelude to tests of the relationship between wage rigidities and labour market institutions. Evidence from seven countries indicates that the evolution of factor shares is well explained by changes in capital intensity, which is itself well explained by product wages and technical progress. A key implication is that changes in full employment capital-labour ratios have been the dominant reason for the longer-run decline of profit shares in Europe and Japan relative to the United States. It follows that changes in cyclically adjusted factor shares provide little or no information regarding the gap between the actual real wage and its full employment value.

Suggested Citation

  • John McCallum, 1986. "Wage Gaps, Factor Shares and Real Wages," Palgrave Macmillan Books, in: Lars Calmfors & Henrik Horn (ed.), Trade Unions, Wage Formation and Macroeconomic Stability, pages 294-317, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-08596-5_20
    DOI: 10.1007/978-1-349-08596-5_20
    as

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