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Democracy and the Labor Share of Income: A Cross-Country Analysis

In: Labor Income Share in Asia

Author

Listed:
  • Marta Guerriero

    (Global Sustainable Development, University of Warwick)

Abstract

Summary statistics on the labor share of income show that between-country variation is much greater than within-country variation: functional income distribution is determined by factors which change substantially across countries but are persistent over time. This article attempts to shed some light on the long-run and political economy determinants of the labor income share. We revisit and extend previous empirical research on democratic political institutions and the labor share using a dataset of 112 countries over the period 1970–2015. Our empirical analysis shows that democracy allows workers to appropriate a higher share of national income. The evidence is robust to different indices of democracy and different periods of time, and after performing instrumental variable estimation. These results are particularly relevant today, in light of the recent global decline in the labor income share and current crisis of democracy.

Suggested Citation

  • Marta Guerriero, 2019. "Democracy and the Labor Share of Income: A Cross-Country Analysis," ADB Institute Series on Development Economics, in: Gary Fields & Saumik Paul (ed.), Labor Income Share in Asia, chapter 0, pages 151-176, Springer.
    • Handle: RePEc:spr:adbchp:978-981-13-7803-4_6
    DOI: 10.1007/978-981-13-7803-4_6
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    Cited by:

    1. Raihan, Selim, 2022. "What Does Data on Functional Income Distribution tell us about Trends in and Correlates of Income Inequality in The Asia-Pacific?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 45-64.
    2. Małgorzata Gawrycka & Anna Szymczak, 2021. "A Panel Analysis of the Impact of Green Transformation and Globalization on the Labor Share in the National Income," Energies, MDPI, vol. 14(21), pages 1-14, October.
    3. David Autor & B. N. Kausik, 2026. "Resolving the automation paradox: falling labor share, rising wages," Papers 2601.06343, arXiv.org.
    4. Raihan, Selim, 2021. "Functional Income Distribution and Inequality in the Asia-Pacific Countries," MPRA Paper 110469, University Library of Munich, Germany.

    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
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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