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Sectoral Shifts in Europe and the United States: How They Affect Aggregate Labour Shares and the Properties of Wage Equations


  • Alain de Serres
  • Stefano Scarpetta
  • Christine de la Maisonneuve


This paper sheds light on the importance of aggregation bias in the analysis of wage shares developments over time and across countries. We focus on five European countries and the United States and show that the trend decline in the aggregate wage share observed in these countries over much of the 1980s and 1990s partly reflects changes in the sectoral composition of the economy. The application of a fixed-weight aggregation method changes the profile of the observed wage share in a significant way: in particular there is no longer sign of an overshooting of the wage share levels of the early-1970s. Error-correction wage equations based on the adjusted wage shares generally have a better regression fit and show long-run elasticities of real wages to unemployment that vary less across countries and are substantially lower than those obtained with observed shares. These results are broadly confirmed by wage regressions using sectoral data and the Pooled Mean Group estimator ... Changements sectoriels en Europe et aux Etats-Unis : Impact sur les parts salariales globales et les propriétés des équations de salaire Cette étude examine l’importance du biais d’agrégation dans l’analyse de l’évolution des parts salariales au cours du temps et entre pays. L’étude couvre cinq pays européens ainsi que les Etats-Unis et montre que la baisse tendancielle de la part salariale agrégée observée dans ces pays durant la majeure partie des années 80 et 90 reflète en partie des changements dans la composition sectorielle de l’économie. L’application d’une méthode d’agrégation basée sur des poids fixes change de manière significative le profil des parts salariales observées: plus particulièrement, les parts salariales ainsi ajustées ne descendent plus en deçà du niveau du début des années 1970. Les équations de salaires à correction d’erreurs basées sur les parts salariales ajustées ont en général de meilleures propriétés statistiques et génèrent des élasticités de long-terme des salaires par rapport au niveau de chômage qui varient moins à travers les pays et qui sont significativement inférieures à celles obtenues à partir des parts observées. Ces résultats sont dans l’ensemble confirmés par les estimations d’équations de salaire basées sur des données sectorielles et l’estimateur de « pooled mean group ».

Suggested Citation

  • Alain de Serres & Stefano Scarpetta & Christine de la Maisonneuve, 2002. "Sectoral Shifts in Europe and the United States: How They Affect Aggregate Labour Shares and the Properties of Wage Equations," OECD Economics Department Working Papers 326, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:326-en

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    Cited by:

    1. Daniele Checchi & Cecilia García-Peñalosa, 2010. "Labour Market Institutions and the Personal Distribution of Income in the OECD," Economica, London School of Economics and Political Science, vol. 77(307), pages 413-450, July.
    2. Carlos A. Ibarra & Jaime Ros, 2017. "The decline of the labour share in Mexico: 1990–2015," WIDER Working Paper Series 183, World Institute for Development Economic Research (UNU-WIDER).
    3. Hagen Krämer, 2010. "The alleged stability of the labour share of income in macroeconomic theories of income distribution," IMK Working Paper 11-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Arpaia, Alfonso & Pérez, Esther & Pichelmann, Karl, 2009. "Understanding labour income share dynamics in Europe," MPRA Paper 15649, University Library of Munich, Germany.
    5. repec:hal:journl:halshs-00140529 is not listed on IDEAS
    6. Torrini, Roberto, 2005. "Profit share and returns on capital stock in Italy: the role of privatisations behind the rise of the 1990s," LSE Research Online Documents on Economics 19915, London School of Economics and Political Science, LSE Library.
    7. Dünhaupt, Petra., 2013. "Determinants of functional income distribution : theory and empirical evidence," ILO Working Papers 994841223402676, International Labour Organization.
    8. Jakub Growiec, 2009. "Determinants of the Labor Share: Evidence from a Panel of Firms," NBP Working Papers 69, Narodowy Bank Polski, Economic Research Department.
    9. Che, Natasha Xingyuan, 2010. "Factor Endowment, Structural Change, and Economic Growth," MPRA Paper 22352, University Library of Munich, Germany.
    10. Bakas, Dimitrios & Panagiotidis, Theodore & Pelloni, Gianluigi, 2016. "On the significance of labour reallocation for European unemployment: Evidence from a panel of 15 countries," Journal of Empirical Finance, Elsevier, vol. 39(PB), pages 229-240.
    11. Natasha X Che, 2012. "Factor Endowment, Structural Coherence, and Economic Growth," IMF Working Papers 12/165, International Monetary Fund.
    12. repec:eee:dyncon:v:87:y:2018:i:c:p:74-93 is not listed on IDEAS
    13. Bárbara Cardoso Dias & Ana Urraca Ruiz, 2016. "A Mudança Estrutural Como Indutora Da Distribuição Funcional Da Renda No Brasil," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 021, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    14. Growiec, Jakub & McAdam, Peter & Mućk, Jakub, 2018. "Endogenous labor share cycles: Theory and evidence," Journal of Economic Dynamics and Control, Elsevier, vol. 87(C), pages 74-93.
    15. Dorothy Power & Gerald Epstein, 2002. "The Return of Finance and Finance's Returns: Recent Trends in Rentier Incomes in OECD Countries, 1960-2000," Research Briefs rb2002-2, Political Economy Research Institute, University of Massachusetts at Amherst.
    16. repec:spr:eurasi:v:4:y:2014:i:1:p:3-30 is not listed on IDEAS
    17. Aretz, Bodo & Busl, Claudia & Gürtzgen, Nicole & Hogrefe, Jan & Kappler, Marcus & Steffes, Susanne & Westerheide, Peter, 2009. "Endbericht zum Forschungsauftrag fe 13/08: "Ursachenanalyse der Verschiebung in der funktionalen Einkommensverteilung in Deutschland" (Aktenzeichen I A 3 - Vw 3170/08/10035)," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110510.
    18. repec:spr:pharme:v:4:y:2014:i:1:p:3-30 is not listed on IDEAS
    19. Nicolas Canry & Arnaud Lechevalier, 2006. "Wage share variations in France and Germany since 1970: what does really matter?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00140529, HAL.
    20. repec:ilo:ilowps:484122 is not listed on IDEAS
    21. Simone Bertoli & Francesco Farina, 2007. "The functional distribution of income: a review of the theoretical literature and of the empirical evidence around its recent pattern in European countries," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 005, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    22. Bruno Decreuse & Paul Maarek, 2011. "Can the HOS model explain changes in labor shares? A tale of trade and wage rigidities," Working Papers halshs-00551345, HAL.

    More about this item


    aggregation bias; biais d'aggrégation; part salariale; wage equations; wage shares; équation de salaire;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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