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Determinants of functional income distribution in OECD countries


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  • Engelbert Stockhammer

    (Vienna University of Economics & Business Administration)


Wage shares have fallen substantially over the past 25 years. In the Euro area the (adjusted) wage share declined by almost ten percentage points. Recently, there has been a renewed interest in the determinants of functional income distribution. IMF (2007a) and EC (2007) find that technological change has been the main cause of the decline in the wage share and that globalization has been a secondary cause. This study, firstly, tries to replicate these studies to investigate the robustness of their findings. Secondly, the estimated wage share equation is extended to allow for distributional effects of financial globalization and for different effects of union density according to social security system. We find that the estimations on which the conclusions of IMF and EC are based suffer from serious econometric problems and that their findings are not robust. In particular, the effect of technological change is often not statistically significant. Globalization (in production), however, has a robust effect. Results from the extended model suggest economically important (and mostly statistically significant) effects of financial globalization and of union density of non-Ghent countries. However, overall the results are sensitive to the specification and the estimation method.

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Bibliographic Info

Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Studies with number 05-2009.

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Length: 59 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:imk:studie:05-2009

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Blog mentions

As found by, the blog aggregator for Economics research:
  1. Entendiendo la relación entre salarios y beneficios en el caso real de España
    by Alberto Garzón Espinosa in Pijus Economicus on 2012-08-12 09:57:17
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Cited by:
  1. Hein, Eckhard, 2011. "Distribution, 'financialisation' and the financial and economic crisis: Implications for post-crisis economic policies," IPE Working Papers 09/2011, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  2. Jakob Kapeller & Bernhard Schütz, 2012. "Conspicuous consumption, inequality and debt: The nature of consumption-driven profit-led regimes," Economics working papers 2012-13, Department of Economics, Johannes Kepler University Linz, Austria.
  3. Engelbert Stockhammer, 2011. "Polarisierung der Einkommensverteilung als strukturelle Ursache der gegenwärtigen Finanz- und Wirtschaftskrise," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 37(3), pages 378-402.
  4. Puente-Ajovin, Miguel, 2013. "Distribución Funcional De La Renta: Teorías Y Evidencia Empírica
    [Functional Distribution of Income: Theories and Empirical Evidence]
    ," MPRA Paper 49304, University Library of Munich, Germany.
  5. Engelbert Stockhammer, 2010. "Financialization and the Global Economy," Working Papers wp240, Political Economy Research Institute, University of Massachusetts at Amherst.


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