IDEAS home Printed from https://ideas.repec.org/p/ise/remwps/wp03962025.html
   My bibliography  Save this paper

What are the effects of Macroeconomic Rates of Return of Investment on Wage Share?

Author

Listed:
  • José Alves
  • José Carlos Coelho
  • Bernardete Moreira

Abstract

This article assesses the potential effects of the macroeconomic rates of return of private and public investment on wage share for 16 OECD countries from 1980 to 2022. Using the macroeconomic rates of return of investments and the wage share at factor cost and at market price, it was possible to conclude that the first has a positive effect on the wage share. Moreover, the total factor productivity negatively affects the wage share when it comes to private investment, while its influence is positive in the case of public investment. The results were also analyzed according to whether countries presented the total factor productivity of capital above or below the average. This analysis highlights the inverse pattern of the human capital index on wage share, both with respect to the type of investment and to the capital productivity observed across countries.

Suggested Citation

  • José Alves & José Carlos Coelho & Bernardete Moreira, 2025. "What are the effects of Macroeconomic Rates of Return of Investment on Wage Share?," Working Papers REM 2025/0396, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp03962025
    as

    Download full text from publisher

    File URL: https://rem.rc.iseg.ulisboa.pt/wps/pdf/REM_WP_0396_2025.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Berthold Herrendorf & Christopher Herrington & Ákos Valentinyi, 2015. "Sectoral Technology and Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 104-133, October.
    2. António Afonso & Miguel St. Aubyn, 2009. "Macroeconomic Rates Of Return Of Public And Private Investment: Crowding‐In And Crowding‐Out Effects," Manchester School, University of Manchester, vol. 77(s1), pages 21-39, September.
    3. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 907-940.
    4. Laura Carvalho & Armon Rezai, 2016. "Personal income inequality and aggregate demand," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(2), pages 491-505.
    5. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    6. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    7. Heinz Kurz, 2010. "Technical progress, capital accumulation and income distribution in Classical economics: Adam Smith, David Ricardo and Karl Marx," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 17(5), pages 1183-1222.
    8. Lutfi Erden & Randall G. Holcombe, 2005. "The Effects of Public Investment on Private Investment in Developing Economies," Public Finance Review, , vol. 33(5), pages 575-602, September.
    9. Quan V. Le, 2004. "Political and economic determinants of private investment," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(4), pages 589-604.
    10. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    11. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
    12. António Afonso & José Alves & Sofia Monteiro, 2025. "Private investment and public investment: total rates of return and global balances in the OECD," Working Papers REM 2025/0363, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    13. Engelbert Stockhammer, 2004. "Financialisation and the slowdown of accumulation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 28(5), pages 719-741, September.
    14. Ozlem Onaran, 2009. "Wage share, globalization and crisis: the case of the manufacturing industry in Korea, Mexico and Turkey," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(2), pages 113-134.
    15. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    16. Michal Kalecki, 1971. "Class Struggle And The Distribution Of National Income," Kyklos, Wiley Blackwell, vol. 24(1), pages 1-9, February.
    17. Onaran, Özlem, 2011. "Globalisation, macroeconomic performance and distribution," Greenwich Papers in Political Economy 16223, University of Greenwich, Greenwich Political Economy Research Centre.
    18. José Alves & Francisco Baptista & José Carlos Coelho, 2024. "The impact of labor share on economic growth: a panel data analysis for European Union," Working Papers REM 2024/0319, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Engelbert Stockhammer, 2017. "Determinants of the Wage Share: A Panel Analysis of Advanced and Developing Economies," British Journal of Industrial Relations, London School of Economics, vol. 55(1), pages 3-33, March.
    2. Cem Oyvat & Oğuz Öztunalı & Ceyhun Elgin, 2020. "Wage‐led versus profit‐led demand: A comprehensive empirical analysis," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 458-486, July.
    3. Walter Paternesi Meloni & Antonella Stirati, 2021. "What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies," Working Papers PKWP2104, Post Keynesian Economics Society (PKES).
    4. Walter Paternesi Meloni & Antonella Stirati, 2023. "The decoupling between labour compensation and productivity in high‐income countries: Why is the nexus broken?," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 425-463, June.
    5. Bouazizi, Youssef & Oulmakki, Ouail & Savard, Luc & Verny, Jérôme, 2025. "The decline of the wage share in value-added: What have we learned from North African firms?," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 150-162.
    6. Saumik Paul & Yoko Oishi, 2018. "A Primer on the Drivers of Labor Income Share," Working Papers id:12948, eSocialSciences.
    7. Markus Brueckner & Ngo Van Long & Joaquin L. Vespignani, 2020. "Non-Gravity Trade," Globalization Institute Working Papers 388, Federal Reserve Bank of Dallas.
    8. Thomas Palley, 2023. "Theorizing Varieties of Capitalism: economics and the fallacy that 'there is no alternative (TINA)'," Chapters, in: Thomas Palley & Esteban Pérez Caldentey & Matías Vernengo (ed.), Varieties of Capitalism, chapter 1, pages 1-38, Edward Elgar Publishing.
    9. James W. Bono & David H. Wolpert, 2009. "Statistical prediction of the outcome of a noncooperative game," Working Papers 2009-20, American University, Department of Economics.
    10. David Hummels & Jakob R. Munch & Chong Xiang, 2018. "Offshoring and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 56(3), pages 981-1028, September.
    11. Florian Dorn & Clemens Fuest & Niklas Potrafke, 2017. "Globalisation and Income Inequality Revisited," European Economy - Discussion Papers 056, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    12. Andrea Coveri & Mario Pianta, 2019. "The Structural Dynamics of Income Distribution:Technology, Wages and Profits," Working Papers 1901, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2019.
    13. Brenck, Clara & Carvalho, Laura, 2020. "The equalizing spiral in early 21st century Brazil: a Kaleckian model with sectoral heterogeneity," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 298-310.
    14. 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.
    15. Engelbert Stockhammer & Joel Rabinovich & Niall Reddy, 2017. "Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010," Economics Discussion Papers 2017-5, School of Economics, Kingston University London.
    16. Kasahara, Hiroyuki & Liang, Yawen & Rodrigue, Joel, 2016. "Does importing intermediates increase the demand for skilled workers? Plant-level evidence from Indonesia," Journal of International Economics, Elsevier, vol. 102(C), pages 242-261.
    17. Garikai MAKUYANA & Nicholas M. ODHIAMBO, 2018. "Public and Private Investment and Economic Growth in Zambia: A Dynamic Approach," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(4), pages 503-526.
    18. David B. Audretsch & Mark Sanders, 2007. "Globalization and the Rise of the Entrepreneurial Economy," Jena Economics Research Papers 2007-003, Friedrich-Schiller-University Jena.
    19. Markus Brueckner & Ngo Van Long & Joaquin Vespignani, 2022. "Trade, education, and income inequality," Applied Economics, Taylor & Francis Journals, vol. 54(40), pages 4608-4631, August.
    20. Parui, Pintu, 2021. "The Macroeconomic Effects of Financialization and the Wage Gap between Blue and White Collar Workers," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 416-443.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ise:remwps:wp03962025. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sandra Araújo (email available below). General contact details of provider: https://rem.rc.iseg.ulisboa.pt/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.