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Development and the Labor Share

Author

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  • Paul Maarek
  • Elsa Orgiazzi

Abstract

A U-shaped relationship between development and the labor share of income is brought to light. To do so, a panel dataset on the labor share in the manufacturing sector of developing countries is exploited. This dataset has greater coverage than the ones of previous studies focusing on developing countries. These data are also available at the disaggregated level for 28 manufacturing subsectors. This allows us to show that the U-shaped pattern of the labor share is also observed at the subsector level, suggesting that it does not correspond to reallocation forces across manufacturing subsectors during the development process. Standard theories of development economics that feature duality in the labor market easily generate such a pattern.

Suggested Citation

  • Paul Maarek & Elsa Orgiazzi, 2020. "Development and the Labor Share," The World Bank Economic Review, World Bank, vol. 34(1), pages 232-257.
    • Handle: RePEc:oup:wbecrv:v:34:y:2020:i:1:p:232-257.
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    File URL: http://hdl.handle.net/10.1093/wber/lhy001
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    Citations

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    Cited by:

    1. François Facchini & Mickael Melki & Andrew Pickering, 2017. "Labour Costs and the Size of Government," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(2), pages 251-275, April.
    2. Wu, Huiwan, 2024. "How does enforcement of social insurance law minimize income gaps within firms: From a perspective of worker bargaining power," Finance Research Letters, Elsevier, vol. 62(PB).
    3. Carlos A. Ibarra & Jaime Ros, 2017. "The decline of the labour share in Mexico: 1990-2015," WIDER Working Paper Series wp-2017-183, World Institute for Development Economic Research (UNU-WIDER).
    4. Xavier Fernando Briones Mendoza & Leobaldo Enrique Molero Oliva & Oscar Xavier Calderón Zamora, 2018. "La función de producción Cobb-Douglas en el Ecuador," Revista Tendencias, Universidad de Narino, vol. 19(2), pages 45-73.
    5. Carlos A. Ibarra & Jaime Ros, 2017. "The decline of the labour share in Mexico: 1990–2015," WIDER Working Paper Series 183, World Institute for Development Economic Research (UNU-WIDER).
    6. Ibarra, Carlos A. & Ros, Jaime, 2019. "The decline of the labor income share in Mexico, 1990–2015," World Development, Elsevier, vol. 122(C), pages 570-584.
    7. Federico Riccio & Lorenzo Cresti & Maria Enrica Virgillito, 2025. "The labour share along global value chains: perspectives and evidence from sectoral interdependence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 161(2), pages 635-684, May.
    8. Arif, Imran, 2021. "Productive knowledge, economic sophistication, and labor share," World Development, Elsevier, vol. 139(C).
    9. Giorgos Gouzoulis, 2022. "Financialisation, globalisation, and the industrial labour share: A comparison between Iran and Thailand," Industrial Relations Journal, Wiley Blackwell, vol. 53(1), pages 35-52, January.

    More about this item

    Keywords

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    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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