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Labour and Financial Crises: Is Labour Paying the Price of the Crisis?

Author

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  • Rémi Bazillier

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1, Panthéon-Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - Pres Hesam)

  • Boris Najman

    (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

Abstract

This paper investigates the relationship between the labour share and financial crises. While Diwan (2001) or Maarek et al. (2013) focused on the currency crisis, we propose to see if their analyses can be extended to the banking crisis and how it can influence the relative bargaining power of labour and capital within firms. To this end, we use international panel data of the share of labour in GDP. We confirm the existence of a negative trend for the labour share, which is largely explained by financial crises. However, the results differ for currency and banking crises. Currency crises affect the labour share negatively, while banking crises primarily affect capital income, at least during the year of the crisis. In the three years following a currency crisis, the labour share tends to be reduced by around 2% per year on average.

Suggested Citation

  • Rémi Bazillier & Boris Najman, 2017. "Labour and Financial Crises: Is Labour Paying the Price of the Crisis?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01444339, HAL.
  • Handle: RePEc:hal:cesptp:hal-01444339
    DOI: 10.1057/s41294-016-0015-z
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01444339
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    1. Deepak Mishra & Mrs. Poonam Gupta & Ms. Ratna Sahay, 2003. "Output Response to Currency Crises," IMF Working Papers 2003/230, International Monetary Fund.
    2. Rémi Bazillier & Jérôme Hericourt, 2017. "The Circular Relationship Between Inequality, Leverage, And Financial Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 463-496, April.
    3. Rose, Andrew K. & Spiegel, Mark M., 2011. "Cross-country causes and consequences of the crisis: An update," European Economic Review, Elsevier, vol. 55(3), pages 309-324, April.
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    Cited by:

    1. Paul Maarek & Elsa Orgiazzi, 2020. "Development and the Labor Share," World Bank Economic Review, World Bank Group, vol. 34(1), pages 232-257.
    2. Mehdi El Herradi & Aurélien Leroy, 2021. "The rich, the poor, and the middle class: banking crises and income distribution," Working Papers halshs-03269859, HAL.
    3. Rémi Bazillier & Jérôme Hericourt, 2017. "The Circular Relationship Between Inequality, Leverage, And Financial Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 463-496, April.
    4. 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.
    5. Paul Maarek & Elsa Orgiazzi, 2014. "Labor Share and development," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201410, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

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    More about this item

    Keywords

    labour share ; banking crises ; currency crises;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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