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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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    Citations

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    Cited by:

    1. Brada, Josef C., 2013. "The distribution of income between labor and capital is not stable: But why is that so and why does it matter?," Economic Systems, Elsevier, vol. 37(3), pages 333-344.
    2. Michał Brzeziński & Michał Myck & Mateusz Najsztub, 2019. "Reevaluating distributional consequences of the transition to market economy in Poland: new results from combined household survey and tax return data," Working Papers 2019-18, Faculty of Economic Sciences, University of Warsaw.
    3. Paweł Bukowski & Filip Novokmet, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," Journal of Economic Growth, Springer, vol. 26(2), pages 187-239, June.
    4. Marek Skawiński & Paweł Chrostek & Paweł Bukowski & Filip Novokmet, 2023. "Income inequality in the 21st century Poland," MF Working Papers 40, Ministry of Finance in Poland.
    5. Chih‐Hai Yang & Meng‐Wen Tsou, 2021. "Globalization and the labor share in China: Firm‐level evidence," Manchester School, University of Manchester, vol. 89(1), pages 1-23, January.
    6. Pawel Bukowski & Filip Novokmet, 2017. "Top Incomes during Wars, Communism and Capitalism: Poland 1892-2015," World Inequality Lab Working Papers halshs-02797835, HAL.
    7. Guiming Liao & Zheli Hu & Zhichen Yang & Qianlin Yin & Jiahui Chen, 2025. "The Perception of Policy Uncertainty and the Labor Income Share of Firms: Empirical Research Based on Double Machine Learning," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 999-1011, March.
    8. Corbellini, Aldo & Magnani, Marco & Morelli, Gianluca, 2021. "Labor market analysis through transformations and robust multivariate models," Socio-Economic Planning Sciences, Elsevier, vol. 73(C).
    9. McAdam, Peter & Muck, Jakub & Growiec, Jakub, 2015. "Will the true labor share stand up?," Working Paper Series 1806, European Central Bank.
    10. Roya Taherifar & Mark J. Holmes & Gazi M. Hassan, 2023. "The drivers of labour share and impact on pay inequality: A firm-level investigation," Working Papers in Economics 23/03, University of Waikato.
    11. Francesco Bloise & Irene Brunetti & Valeria Cirillo, 2022. "Firm strategies and distributional dynamics: labour share in Italian medium-large firms," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(2), pages 623-655, July.
    12. Wang, Liang & Hu, Jun & Yao, Daifei & Skibniewski, Miroslaw J., 2025. "Indelible imprint: CEOs’ poverty experience and corporate labor income share," Journal of Business Research, Elsevier, vol. 199(C).
    13. Nicola Pensiero, 2022. "The effect of computerisation on the wage share in United Kingdom workplaces," The Economic and Labour Relations Review, , vol. 33(1), pages 158-177, March.
    14. Bukowski, Pawel & Novokmet, Filip, 2017. "Top incomes during wars, communism and capitalism: Poland 1892-2015," LSE Research Online Documents on Economics 101855, London School of Economics and Political Science, LSE Library.
    15. Josef C. Brada & El-hadj Bah, 2014. "Growing Income Inequality as a Challenge to 21st Century Capitalism," a/ Working Papers Series 1402, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    16. Brzezinski, Michal & Myck, Michał & Najsztub, Mateusz, 2022. "Sharing the gains of transition: Evaluating changes in income inequality and redistribution in Poland using combined survey and tax return data," European Journal of Political Economy, Elsevier, vol. 73(C).
    17. Adrjan, Pawel, 2018. "The mightier, the stingier: Firms’ market power, capital intensity, and the labor share of income," MPRA Paper 83925, University Library of Munich, Germany.

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