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Why is the wage share falling in emerging economies? Industry level evidence

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  • Guschanski, Alexander
  • Onaran, Özlem

Abstract

This article presents an econometric analysis of the wage share in seven emerging economies. We focus on the effect of globalisation, captured by participation in global value chains and financial integration, indicators of bargaining power of labour and technological change on the wage share. We use input-output tables that allow us to obtain detailed measures of global value chain participation, and sectoral data to distinguish the effect on high- and low-skilled workers and within manufacturing and service industries. We find a negative effect of offshoring from advanced to emerging economies, as well as negative effects of financial integration. Our findings suggest that the transmission mechanism is a reduction in labours’ bargaining power vis-à-vis capital. We find a robust positive effect of union density on the wage share but no evidence of a negative effect of technological change.

Suggested Citation

  • 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.
    • Handle: RePEc:gpe:wpaper:17536
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    File URL: http://gala.gre.ac.uk/id/eprint/17536/1/ws%20emerging%20market%20panel%20gppe%2002.pdf
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    Cited by:

    1. Anwesha Basu & C. Veeramani, 2021. "Labour share in Indian economy: An Exploratory analysis of the role of trade, technology and structural transformation," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2021-027, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. 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.
    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. Onur Özdemir, 2020. "The handicap for enhanced solidarity across advanced economies: The greater the economic openness higher the unequal distribution of income," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(4), pages 585-632, December.
    5. Adam Aboobaker, 2022. "Macroeconomic Determinants of South Africa's Post-Apartheid Income Distribution," World Inequality Lab Working Papers halshs-03693225, HAL.
    6. 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.
    7. Adam Aboobaker, 2022. "Macroeconomic Determinants of South Africa's Post-Apartheid Income Distribution," Working Papers halshs-03693225, HAL.
    8. 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.
    9. Alexander Guschanski & Özlem Onaran, 2018. "Determinants of the Wage Share: A Cross-country Comparison Using Sectoral Data," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 19(02), pages 44-54, July.
    10. repec:ces:ifofor:v:19:y:2018:i:2:p:44-54 is not listed on IDEAS

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    More about this item

    Keywords

    wage share; income distribution; emerging economies; global value chains; union density; technological change;
    All these keywords.

    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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