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Privatization, Entry Regulation and the Decline of Labors Share of GDP: A Cross-Country Analysis of the Network Industries

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Author Info
Ghazala Azmat
Alan Manning
John Van Reenen

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Abstract

Labor's share of GDP in most OECD countries has declined over the last two decades. Someauthors have suggested that these changes are linked to deregulation of product and labormarkets. To examine this we focus on a large quasi-experiment in the OECD: theprivatization of many network industries (e.g. telecommunications and utilities). We present amodel with agency problems, imperfect product market competition and worker bargainingwhich makes clear predictions on how the labor share, employment and wages respond toprivatization and other regulatory changes. We exploit cross-country panel data on severalnetwork industries and find that privatization can account for a significant proportion of thefall of labor's share (a fifth overall, but over half in Britain and France). The impact ofprivatization has been offset by falling barriers to entry, which consistent with theory,dampens profit margins.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0806.

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Date of creation: Jun 2007
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Handle: RePEc:cep:cepdps:dp0806

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Related research
Keywords: Profit share; Wages; Privatization; Entry Regulation;

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Find related papers by JEL classification:
E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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    Other versions:
  2. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2003. "Regulation and Investment," OECD Economics Department Working Papers 352, OECD, Economics Department. [Downloadable!]
    Other versions:
  3. Dean Baker & Andrew Glyn & David Howell & John Schmitt, 2002. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," SCEPA Working Papers 2002-17, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
    Other versions:
  4. Van Reenen, John, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 195-226, February. [Downloadable!] (restricted)
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  5. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August. [Downloadable!] (restricted)
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  6. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD, Economics Department. [Downloadable!]
  7. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-78, December. [Downloadable!] (restricted)
  8. Caballero, Ricardo J. & Hammour, Mohamad L., 1998. "Jobless growth: appropriability, factor substitution, and unemployment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 51-94, June. [Downloadable!] (restricted)
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  9. Stephen Nickell, 2003. "A Picture of European Unemployment: Success and Failure," CEP Discussion Papers dp0577, Centre for Economic Performance, LSE. [Downloadable!]
  10. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03. [Downloadable!] (restricted)
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  11. repec:bep:maccon:v:3:y:2003:i:1:p:1103-1103 is not listed on IDEAS
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