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Sectoral composition of output and the wage share: The role of the service sector

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  • Beqiraj, Elton
  • Fanti, Lucrezia
  • Zamparelli, Luca

Abstract

This paper looks at structural change as one additional source of decline in the wage share. First, we provide a decomposition of changes in aggregate wage shares into changes due to variations in output composition and in sectoral wage shares for nine OECD countries between 1977 and 2010. We show that the rise in the service sector is a relevant factor in explaining the fall of the wage share, at least for some countries. Next, we develop a two-sector Kaleckian growth model consisting of the service and manufacturing sectors. We assume that structural change is exogenous as it arises from a shift in consumers’ preferences or in the saving rate. When mark-ups are relatively higher in the service sector, we show that: i) a shift in the sectoral composition of demand in favor of the service sector good generates a rise in the profit share; ii) a preferences’ shock in favor of the service sector raises growth if the price of the service good is sufficiently high.

Suggested Citation

  • Beqiraj, Elton & Fanti, Lucrezia & Zamparelli, Luca, 2019. "Sectoral composition of output and the wage share: The role of the service sector," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 1-10.
    • Handle: RePEc:eee:streco:v:51:y:2019:i:c:p:1-10
    DOI: 10.1016/j.strueco.2019.06.009
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    Cited by:

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    3. Cauvel, Michael & Pacitti, Aaron, 2022. "Bargaining power, structural change, and the falling U.S. labor share," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 512-530.
    4. Lucrezia Fanti & Luca Zamparelli, 2021. "The paradox of thrift in a two‐sector Kaleckian growth model," Metroeconomica, Wiley Blackwell, vol. 72(3), pages 526-538, July.
    5. Nishi, Hiroshi, 2022. "Income distribution, technical change, and economic growth: A two-sector Kalecki–Kaldor approach," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 418-432.
    6. Murakami, Hiroki & Zimka, Rudolf, 2020. "On dynamics in a two-sector Keynesian model of business cycles," Chaos, Solitons & Fractals, Elsevier, vol. 130(C).
    7. Bischi, Gian Italo & Matsumoto, Akio & Carrera, Edgar J. Sanchez, 2020. "Foreword to the SCED special issue on “Nonlinear Social Dynamics”," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 236-237.
    8. Walter Paternesi Meloni & Antonella Stirati, 2021. "What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies," Working Papers PKWP2104, Post Keynesian Economics Society (PKES).
    9. Lucrezia Fanti, 2021. "‘Kaldor Facts’ and the decline of Wage Share: An agent based-stock flow consistent model of induced technical change along Classical and Keynesian lines," Journal of Evolutionary Economics, Springer, vol. 31(2), pages 379-415, April.

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    More about this item

    Keywords

    Structural change; Functional income distribution; Manufacturing; Services;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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