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Sectoral Shifts in Europe and the United States: How They Affect Aggregate Labour Shares and the Properties of Wage Equations

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  • Alain de Serres
  • Stefano Scarpetta
  • Christine de la Maisonneuve

Abstract

This paper sheds light on the importance of aggregation bias in the analysis of wage shares developments over time and across countries. We focus on five European countries and the United States and show that the trend decline in the aggregate wage share observed in these countries over much of the 1980s and 1990s partly reflects changes in the sectoral composition of the economy. The application of a fixed-weight aggregation method changes the profile of the observed wage share in a significant way: in particular there is no longer sign of an overshooting of the wage share levels of the early-1970s. Error-correction wage equations based on the adjusted wage shares generally have a better regression fit and show long-run elasticities of real wages to unemployment that vary less across countries and are substantially lower than those obtained with observed shares. These results are broadly confirmed by wage regressions using sectoral data and the Pooled Mean Group estimator ... Changements sectoriels en Europe et aux Etats-Unis : Impact sur les parts salariales globales et les propriétés des équations de salaire Cette étude examine l’importance du biais d’agrégation dans l’analyse de l’évolution des parts salariales au cours du temps et entre pays. L’étude couvre cinq pays européens ainsi que les Etats-Unis et montre que la baisse tendancielle de la part salariale agrégée observée dans ces pays durant la majeure partie des années 80 et 90 reflète en partie des changements dans la composition sectorielle de l’économie. L’application d’une méthode d’agrégation basée sur des poids fixes change de manière significative le profil des parts salariales observées: plus particulièrement, les parts salariales ainsi ajustées ne descendent plus en deçà du niveau du début des années 1970. Les équations de salaires à correction d’erreurs basées sur les parts salariales ajustées ont en général de meilleures propriétés statistiques et génèrent des élasticités de long-terme des salaires par rapport au niveau de chômage qui varient moins à travers les pays et qui sont significativement inférieures à celles obtenues à partir des parts observées. Ces résultats sont dans l’ensemble confirmés par les estimations d’équations de salaire basées sur des données sectorielles et l’estimateur de « pooled mean group ».

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File URL: http://dx.doi.org/10.1787/763626062738
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 326.

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Date of creation: 08 Apr 2002
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Handle: RePEc:oec:ecoaaa:326-en

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Related research

Keywords: aggregation bias; wage equations; wage shares; part salariale; biais d'aggrégation; équation de salaire;

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Cited by:
  1. Jakub Growiec, 2009. "Determinants of the Labor Share: Evidence from a Panel of Firms," National Bank of Poland Working Papers, National Bank of Poland, Economic Institute 69, National Bank of Poland, Economic Institute.
  2. Nicolas Canry & Arnaud Lechevalier, 2006. "Wage share variations in France and Germany since 1970: what does really matter?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00140529, HAL.
  3. Daniele Checchi & Cecilia Garcìa-Peñalosa, 2008. "Labour market institutions and the personal distribution of income in the OECD," Working Papers halshs-00341005, HAL.
  4. Bruno Decreuse & Paul Maarek, 2011. "Can the HOS model explain changes in labor shares? A tale of trade and wage rigidities," Working Papers halshs-00551345, HAL.
  5. Alfonso Arpaia & Esther Pérez & Karl Pichelmann, 2009. "Understanding Labour Income Share Dynamics in Europe," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 379, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  6. Hagen Krämer, 2010. "The alleged stability of the labour share of income in macroeconomic theories of income distribution," IMK Working Paper 11-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  7. Dorothy Power & Gerald Epstein, 2002. "The Return of Finance and Finance's Returns: Recent Trends in Rentier Incomes in OECD Countries, 1960-2000," Research Briefs, Political Economy Research Institute, University of Massachusetts at Amherst rb2002-2, Political Economy Research Institute, University of Massachusetts at Amherst.
  8. Roberto Torrini, 2005. "Profit share and returns on capital stock in Italy: the role of privatisations behind the rise of the 1990s," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19915, London School of Economics and Political Science, LSE Library.
  9. repec:hal:journl:halshs-00140529 is not listed on IDEAS
  10. Natasha Xingyuan Che, 2012. "Factor Endowment, Structural Coherence, and Economic Growth," IMF Working Papers 12/165, International Monetary Fund.
  11. Che, Natasha Xingyuan, 2010. "Factor Endowment, Structural Change, and Economic Growth," MPRA Paper 22352, University Library of Munich, Germany.
  12. Simone Bertoli & Francesco Farina, 2007. "The functional distribution of income: a review of the theoretical literature and of the empirical evidence around its recent pattern in European countries," Department of Economic Policy, Finance and Development (DEPFID) University of Siena, Department of Economic Policy, Finance and Development (DEPFID), University of Siena 005, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.

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