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Demographic Change and the Labour Share of Income

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  • Torsten Schmidt
  • Simeon Vosen

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Abstract

Despite similar levels of per capita income, education, and technology the development of labour shares in OECD countries has displayed diff erent patterns since 1960. The paper examines the role of demography in this regard. Employing an overlapping generations model we fi rst examine the mechanisms through which demographic change can aff ect labour shares. Model simulations show that demographic eff ects on the labour share are larger in open than in closed economies. Empirical estimates, conducted using panel cointegration techniques for a panel of 18 OECD countries, provide strong support for demographic eff ects on the labour share. In line with the simulation results, we also fi nd evidence that openness increases this impact.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0165.

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Length: 32 pages
Date of creation: Feb 2010
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Handle: RePEc:rwi:repape:0165

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Keywords: Labour share; demographic change; panel cointegration;

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References

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Cited by:
  1. Torsten Schmidt & Simeon Vosen, 2010. "Demographic Change and the Labour Share of Income," Ruhr Economic Papers 0165, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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