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Higher education, employers’ monopsony power and the labour share in OECD countries

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  • Daudey, Emilie
  • Decreuse, Bruno

Abstract

This paper examines the impact of higher education on the labour share. It is based on the following idea: as education offers adaptability skills, it should reduce employers’ monopsony power and, therefore, increase the labour share. This idea is developed in a two-sector model with search unemployment and wage competition between employers to attract/keep workers. Using panel data for eleven OECD countries, we show that the proportion of higher educated in the population has a significant positive effect on the labour share: typically, an increase of one standard deviation in higher education induces a three point increase in the labour share. The other determinants of the labour share are compatible with the theoretical model. They include the capital-output ratio (-), minimum to median wage ratio (+), union density (+). We also find that the unemployment rate has a negative and significant impact on the labour share, which, together with the positive impact of higher education, is incompatible with a three-factor model where factors are paid their marginal products.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3631.

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Date of creation: Jul 2006
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Handle: RePEc:pra:mprapa:3631

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Keywords: Search frictions; Adaptability; Labour share; Macroeconomic panel data;

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Cited by:
  1. Luciano BOGGIO & Vincenzo DALL’AGLIO & Marco MAGNANI, 2010. "On Labour Shares in Recent Decades: A Survey," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 118(3), pages 283-333.
  2. Paul Maarek, 2012. "Labor share, Informal sector and Development," THEMA Working Papers 2012-34, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  3. Batyra, Anna & de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Declining bargaining power of workers and the rise of early retirement in Europe," GIAM Working Papers 13-6, Galatasaray University Economic Research Center.
  4. Elsa Orgiazzi & Paul Maarek, 2010. "Which factor bears the cost of currency crises?," 2010 Meeting Papers 810, Society for Economic Dynamics.

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