Labour Shares and the Role of Capital and Labour Market Imperfections
AbstractIn continental Europe, labour shares in national income have exhibited considerable variation since 1970. Empirical and theoretical research suggests that the evolution of labour markets and labour market imperfections can, in part, explain this phenomenon. The author analyzes the role of capital market imperfections in the determination of the distribution of national income, comparing European and Anglo-Saxon countries. She uses a simple general-equilibrium model to trace the effects of credit and labour market imperfections on factor shares. Simulations indicate that improvements in capital markets can explain lower labour shares. An increase in the degree of employee power results in higher labour shares. Regression results confirm the author's findings. Improvements in credit markets and decreasing employee bargaining power have contributed to shrinking labour shares, especially in Europe. Openness is a negative determinant of labour shares.
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Bibliographic InfoPaper provided by Bank of Canada in its series Discussion Papers with number 09-2.
Length: 37 pages
Date of creation: 2009
Date of revision:
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Economic models; Labour markets; Financial institutions;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-14 (All new papers)
- NEP-BEC-2009-02-14 (Business Economics)
- NEP-LAB-2009-02-14 (Labour Economics)
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