Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Wage-Productivity Gap Revisited: Is the Labour Share Neutral to Employment?

Contents:

Author Info

  • Marika Karanassou

    ()
    (Queen Mary, University of London and IZA)

  • Hector Sala

    ()
    (Universitat Aut�noma de Barcelona and IZA)

Abstract

This paper challenges the prevailing view of the neutrality of the labour income share to labour demand, and investigates its impact on the evolution of employment. Whilst maintaining the assumption of a unitary long-run elasticity of wages with respect to productivity, we demonstrate that productivity growth affects the labour share in the long run due to frictional growth (that is, the interplay of wage dynamics and productivity growth). In the light of this result, we consider a stylised labour demand equation and show that the labour share is a driving force of employment. We substantiate our analytical exposition by providing empirical models of wage setting and employment equations for France, Germany, Italy, Japan, Spain, the UK, and the US over the 1960-2008 period. Our findings show that the timevarying labour share of these countries has significantly influenced their employment trajectories across decades. This indicates that the evolution of the labour income share (or, equivalently, the wage-productivity gap) deserves the attention of policy makers.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.qmul.ac.uk/papers/doc/wp668.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 668.

as in new window
Length:
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:qmw:qmwecw:wp668

Contact details of provider:
Postal: London E1 4NS
Phone: +44 (0) 20 7882 5096
Fax: +44 (0) 20 8983 3580
Web page: http://www.econ.qmul.ac.uk
More information through EDIRC

Related research

Keywords: Wages; Productivity; Labour income share; Employment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-35.
    • David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
  2. Jordi Galí, 2009. "The return of the wage Phillips curve," Economics Working Papers 1199, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2010.
  3. Pissarides, Christopher A, 1991. "Real Wages and Unemployment in Australia," Economica, London School of Economics and Political Science, vol. 58(229), pages 35-55, February.
  4. Timothy J. Hatton, 2007. "Can Productivity Growth Explain the NAIRU? Long-Run Evidence from Britain, 1871-1999," Economica, London School of Economics and Political Science, vol. 74(295), pages 475-491, 08.
  5. Chiaki Moriguchi, 2008. "Top Wage Incomes in Japan, 1951-2005," NBER Working Papers 14537, National Bureau of Economic Research, Inc.
  6. Fabienne Llense, 2010. "French CEOs' Compensations: What is the Cost of a Mandatory Upper Limit?," CESifo Economic Studies, CESifo, vol. 56(2), pages 165-191, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Marika Karanassou & Hector Sala, 2012. "Inequality and Employment Sensitivities to the Falling Labour Share," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 343-376.
  2. Dario JUDZIK & Hector SALA, 2013. "Productivity, deunionization and trade: Wage effects and labour share implications," International Labour Review, International Labour Organization, vol. 152(2), pages 205-236, 06.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:qmw:qmwecw:wp668. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nick Vriend).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.