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

  • Emilie Daudey

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université Paul Cézanne - Aix-Marseille 3 - Université de la Méditerranée - Aix-Marseille 2 - EHESS - École des hautes études en sciences sociales - CNRS - AMU - Aix-Marseille Université)

  • Bruno Decreuse

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université Paul Cézanne - Aix-Marseille 3 - Université de la Méditerranée - Aix-Marseille 2 - EHESS - École des hautes études en sciences sociales - CNRS - AMU - Aix-Marseille Université)

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.

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Date of creation: 2006
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Handle: RePEc:hal:wpaper:halshs-00409674
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