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Dividing the Pie: the Determinants of Labor’s Share of Income on the Firm Level

This paper is the first to study the factors determining labor’s share of income on the level of the individual firm, employing an unusually informative panel data set. The empirical examination is concerned with Switzerland which stands out as one of the very few developed countries with a stable labor share. Broadly confirming results from previous cross-country and industry-level studies, we find that the main factor decreasing the labor share in the estimation period is the increase in the share of workers using ICT in the firm. The main reasons why Switzerland’s labor share remained almost constant are its relatively slow-rate of technological progress and shifts towards industries with above-average labor shares.

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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 14-352.

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Length: 48 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:kof:wpskof:14-352
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  1. Wößmann, Ludger & Hanushek, Eric A. & Schwerdt, Guido & Wiederhold, Simon, 2014. "Returns to Skills around the World: Evidence from PIAAC," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100388, Verein für Socialpolitik / German Economic Association.
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  3. Alan Krueger, 1999. "Measuring Labor's Share," NBER Working Papers 7006, National Bureau of Economic Research, Inc.
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  5. Damiaan Persyn & John Hutchinson, 2009. "Globalisation, concentration and footloose firms: in search of the main cause of the declining labour share," LICOS Discussion Papers 22909, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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  13. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
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  17. repec:oup:qjecon:v:129:y:2013:i:1:p:61-103 is not listed on IDEAS
  18. Alan Krueger, 1999. "Measuring Labor's Share," Working Papers 792, Princeton University, Department of Economics, Industrial Relations Section..
  19. Dorothe Bonjour & Michael Gerfin, 1997. "The Unequal Distribution of Unequal Pay - An Empirical Analysis of the Gender Wage Gap in Switzerland," Diskussionsschriften dp9702, Universitaet Bern, Departement Volkswirtschaft.
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  26. Arpaia, Alfonso & Pérez, Esther & Pichelmann, Karl, 2009. "Understanding labour income share dynamics in Europe," MPRA Paper 15649, University Library of Munich, Germany.
  27. Heinz Hollenstein & Tobias Stucki, 2012. "The 'New Firm Paradigm' and the Provision of Training: The Impact of ICT, Workplace Organization and Human Capital," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(IV), pages 557-595, December.
  28. Lindbeck, Assar & Snower, Dennis J., 1999. "Multi-Task Learning and the Reorganization of Work. From Tayloristic to Holistic Organization," IZA Discussion Papers 39, Institute for the Study of Labor (IZA).
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  30. Young, Andrew T., 2010. "One of the things we know that ain't so: Is US labor's share relatively stable?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 90-102, March.
  31. Patrick A. Puhani, 2005. "Relative Supply and Demand for Skills in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(IV), pages 555-584, December.
  32. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 489-530.
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