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Determinants of the Labor Share

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  • Jakub Growiec

Abstract

This paper analyzes the sources of labor share variations and the general downward trend of the labor share observed recently in most European economies. Using a unique quarterly firm-level panel data set from the Polish business sector for the period 1995-2008, the author quantifies the impacts on the observed variation in labor shares of (1) firms' "demographics," including age as well as entry and exit behavior; (2) selected labor market characteristics, such as newly filled vacancies, labor market tightness, and human capital measures; (3) firm- and sector-level measures of export intensity, competition, and ownership structure; and (4) shifts in the sectoral makeup of gross domestic product. The potential cross-effects among these variables are also tested. The author concludes that while sector-specific factors, changes in the ownership structure, and the accumulation of human capital explain a large fraction of the observed downward trend in the labor share, labor market characteristics, market structures, and firm demographics are robust correlates of labor share changes at high frequency.

Suggested Citation

  • Jakub Growiec, 2012. "Determinants of the Labor Share," Eastern European Economics, Taylor & Francis Journals, vol. 50(5), pages 23-65, September.
  • Handle: RePEc:mes:eaeuec:v:50:y:2012:i:5:p:23-65
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