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Higher education, employers' monopsony power and the labour share in OECD countries

Author

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  • Emilie Daudey

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Bruno Decreuse

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper examines the impact of higher education on the labour share. It is based on the following idea: as education offers adaptability skills, it should reduce employers' monopsony power and, therefore, increase the labour share. This idea is developed in a two-sector model with search unemployment and wage competition between employers to attract/keep workers. Using panel data for eleven OECD countries, we show that the proportion of higher educated in the population hasa significant positive effect on the labour share: typically, an increase of one standard deviation inhigher education induces a three point increase in the labour share. The other determinants of the labour share are compatible with the theoretical model. They include the capital-output ratio (-), minimum to median wage ratio (+), union density (+). We also find that the unemployment rate has a negative and significant impact on the labour share, which, together with the positive impact of higher education, is incompatible with a three-factor model where factors are paid their marginal products.

Suggested Citation

  • Emilie Daudey & Bruno Decreuse, 2006. "Higher education, employers' monopsony power and the labour share in OECD countries," Working Papers halshs-00409674, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00409674
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00409674
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    Cited by:

    1. Erik Bengtsson, 2014. "Do unions redistribute income from capital to labour? Union density and wage shares since 1960," Industrial Relations Journal, Wiley Blackwell, vol. 45(5), pages 389-408, September.
    2. Maarek, Paul, 2012. "Labor share, informal sector and development," MPRA Paper 38756, University Library of Munich, Germany.
    3. Anna Batyra & David de la Croix & Olivier Pierrard & Henri Sneessens, 2016. "Structural changes in the labor market and the rise of early retirement in Europe," DEM Discussion Paper Series 16-13, Department of Economics at the University of Luxembourg.
    4. Luciano BOGGIO & Vincenzo DALL’AGLIO & Marco MAGNANI, 2010. "On Labour Shares in Recent Decades: A Survey," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 118(3), pages 283-333.
    5. Elsa Orgiazzi & Paul Maarek, 2010. "Which factor bears the cost of currency crises?," 2010 Meeting Papers 810, Society for Economic Dynamics.
    6. Paul Maarek & Elsa Orgiazzi, 2013. "Currency Crises and the Labour Share," Economica, London School of Economics and Political Science, vol. 80(319), pages 566-588, July.
    7. Paul Maarek & Elsa Orgiazzi, 2014. "Labor Share and development," Economics Working Paper Archive (University of Rennes & University of Caen) 201410, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    8. Paul Maarek & Elsa Orgiazzi, 2020. "Development and the Labor Share," The World Bank Economic Review, World Bank, vol. 34(1), pages 232-257.
    9. Anna Batyra & David de la Croix & Olivier Pierrard & Henri R. Sneessens, 2013. "Declining bargaining power of workers and the rise of early retirement in Europe," GIAM Working Papers 13-6, Galatasaray University Economic Research Center.
    10. Declan Trott, 2013. "Why Has Wage Inequality Risen Most Where Wage Shares Have Fallen Least?," CEPR Discussion Papers 685, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    11. Tippet, Benjamin & Onaran, Özlem & Wildauer, Rafael, 2021. "The determinants of wealth inequality in the UK, USA and France," Greenwich Papers in Political Economy 31260, University of Greenwich, Greenwich Political Economy Research Centre.

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    Keywords

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    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • I20 - Health, Education, and Welfare - - Education - - - General

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