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Globalization, creative destruction, and labour share change: evidence on the determinants and mechanisms from longitudinal plant-level data

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  • Petri Böckerman
  • Mika Maliranta

Abstract

The labour share of GDP has declined in recent decades in many leading economies. This paper examines the mechanisms of falling labour share using Finnish manufacturing plant-level data over three decades. Using a useful variant of the decomposition method, we make a distinction between the changes in the average plant and the micro-level restructuring. We show that micro-level restructuring is the link between the declining labour share and increasing productivity, and that increased international trade is a factor underlying those shifts. Copyright 2012 Oxford University Press 2011 All rights reserved, Oxford University Press.

Suggested Citation

  • Petri Böckerman & Mika Maliranta, 2012. "Globalization, creative destruction, and labour share change: evidence on the determinants and mechanisms from longitudinal plant-level data," Oxford Economic Papers, Oxford University Press, vol. 64(2), pages 259-280, April.
  • Handle: RePEc:oup:oxecpp:v:64:y:2012:i:2:p:259-280
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    File URL: http://hdl.handle.net/10.1093/oep/gpr031
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    Cited by:

    1. Kyoji Fukao & Cristiano Perugini, 2021. "The Long‐Run Dynamics of the Labor Share in Japan," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 445-480, June.
    2. Hernando Zuleta, 2015. "Factor shares, inequality, and capital flows," Southern Economic Journal, John Wiley & Sons, vol. 82(2), pages 647-667, October.
    3. Gouzoulis, Giorgos & Constantine, Collin, 2020. "The Political Economy of Inequality in Chile and Mexico: Two Tales of Neoliberalism," SocArXiv gruzp, Center for Open Science.
    4. Song, Eunbi, 2021. "What drives labor share change? Evidence from Korean industries," Economic Modelling, Elsevier, vol. 94(C), pages 370-385.
    5. Askenazy, Philippe, "undated". "Worker surveillance capital, labour share and productivity," CEPREMAP Working Papers (Docweb) 2004, CEPREMAP.
    6. Decreuse, Bruno & Maarek, Paul, 2017. "Can the HOS model explain changes in labor shares? A tale of trade and wage rigidities," Economic Systems, Elsevier, vol. 41(4), pages 472-491.
    7. d’Albis, Hippolyte & Boubtane, Ekrame & Coulibaly, Dramane, 2021. "Demographic changes and the labor income share," European Economic Review, Elsevier, vol. 131(C).
    8. Yu Zheng & Raul Santaeulalia & Dongya Koh, 2015. "Labor Share Decline and the Capitalization of Intellectual Property Products," 2015 Meeting Papers 844, Society for Economic Dynamics.
    9. Damiani, Mirella & Pompei, Fabrizio & Andrea, Ricci, 2018. "Labour shares, employment protection and unions in European economies," MPRA Paper 91300, University Library of Munich, Germany.
    10. Giorgos Gouzoulis & Collin Constantine, 2020. "The Political Economy of Inequality in Chile and Mexico: Two Tales of Neoliberalism," Working Papers 235, Department of Economics, SOAS, University of London, UK.
    11. Corbellini, Aldo & Magnani, Marco & Morelli, Gianluca, 2021. "Labor market analysis through transformations and robust multivariate models," Socio-Economic Planning Sciences, Elsevier, vol. 73(C).
    12. Koyo Miyoshi, "undated". "The Decline in the Labor Share: Evidence from Japanese Manufacturers f Panel Data," Discussion papers ron340, Policy Research Institute, Ministry of Finance Japan.
    13. Fornaro, Paolo & Luomaranta, Henri, 2017. "Small and Medium Firms, Aggregate Productivity and the Role of Dependencies," ETLA Working Papers 47, The Research Institute of the Finnish Economy.
    14. Xu, Xiang & Li, David Daokui & Zhao, Mofei, 2018. "“Made in China” matters: Integration of the global labor market and the global labor share decline," China Economic Review, Elsevier, vol. 52(C), pages 16-29.
    15. Alessandro Bellocchi & Giovanni Marin & Giuseppe Travaglini, 2021. "The Great Fall of Labor Share:Micro Determinants for EU Countries Over 2011-2019," Working Papers 2102, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2021.
    16. Kauhanen, Antti & Maliranta, Mika, 2012. "Micro-components of aggregate wage dynamics," ETLA Working Papers 1, The Research Institute of the Finnish Economy.
    17. Azenui, Ngwinui Belinda & Rada, Codrina, 2021. "Labor productivity growth in sub-Sahara African LDCs: sectoral contributions and macroeconomic factors," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 10-26.
    18. Kyoji Fukao & Koji Ito & Cristiano Perugini, 2019. "A Microeconomic Analysis of the Declining Labor Share in Japan," ADB Institute Series on Development Economics, in: Gary Fields & Saumik Paul (ed.), Labor Income Share in Asia, chapter 0, pages 247-267, Springer.
    19. Fornaro, Paolo & Luomaranta, Henri, 2015. "Small Versus Large Firms Employment Patterns in Finland: a Comparison," MPRA Paper 66979, University Library of Munich, Germany.
    20. Bridgman, Benjamin, 2018. "Is Labor'S Loss Capital'S Gain? Gross Versus Net Labor Shares," Macroeconomic Dynamics, Cambridge University Press, vol. 22(8), pages 2070-2087, December.
    21. Elena Crivellaro & Aikaterini Karadimitropoulou, 2019. "The role of financial constraints on labour share developments: macro- and micro-level evidence," Working Papers 257, Bank of Greece.
    22. Daniel Berkowitz, 2018. "Market Distortions and Labor Share Distributions: Evidence from Chinese Manufacturing Firms," Working Paper 6466, Department of Economics, University of Pittsburgh.
    23. Paul, Saumik & Isaka, Hironobu, 2019. "Labor Income Share at the Firm Level: Global Trends," IZA Discussion Papers 12852, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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