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The political economy of income distribution: industry level evidence from 14 OECD countries

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  • Guschanski, Alexander
  • Onaran, Özlem

Abstract

This article presents an econometric estimation of the determinants of the wage share, using sectoral data for 14 OECD countries for the period 1970- 2014. We present estimations for the wage share of high- and low-skilled workers and within manufacturing and service industries. We augment sectoral data with input-output tables and union density data to obtain detailed estimations of the effect of technological change, globalisation and bargaining power on the wage share. We find a significant negative effect of globalisation and we discover offshoring to emerging markets to be a robust driver of this process. Technological change had an impact which differs by skill group, but theoretical issues and lack of robustness of the results cast doubt on the hypothesis of skill-biased technological change as a key factor in the overall decline in the wage share. Furthermore, we find a robust effect of institutional factors such as union density and minimum wages on the wage share, lending strong support to the political economy approach to functional income distribution.

Suggested Citation

  • Guschanski, Alexander & Onaran, Özlem, 2017. "The political economy of income distribution: industry level evidence from 14 OECD countries," Greenwich Papers in Political Economy 17518, University of Greenwich, Greenwich Political Economy Research Centre.
  • Handle: RePEc:gpe:wpaper:17518
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    File URL: http://gala.gre.ac.uk/17518/1/ws%20oecd%20panel%20working%20paper%20gppe%2003.pdf
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    References listed on IDEAS

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    Cited by:

    1. Guschanski, Alexander & Onaran, Özlem, 2018. "The labour share and financialisation: Evidence from publicly listed firms," Greenwich Papers in Political Economy 19371, University of Greenwich, Greenwich Political Economy Research Centre.
    2. Kohler, Karsten & Guschanski, Alexander & Stockhammer, Engelbert, 2018. "The impact of financialisation on the wage share. A theoretical clarification and empirical test," Economics Discussion Papers 2018-1, School of Economics, Kingston University London.
    3. Guschanski, Alexander & Onaran, Özlem, 2017. "Why is the wage share falling in emerging economies? Industry level evidence," Greenwich Papers in Political Economy 17536, University of Greenwich, Greenwich Political Economy Research Centre.
    4. Onaran, Özlem & Guschanski, Alexander, 2018. "The causes of falling wage share: sectoral and firm level evidence from developed and developing countries – what have we learned?," Greenwich Papers in Political Economy 19373, University of Greenwich, Greenwich Political Economy Research Centre.

    More about this item

    Keywords

    wage share; income distribution; union density; technology; offshoring;

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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