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The relationship between labour share and unemployment: the role of wage-setting institutions

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  • Pekka Sauramo

Abstract

The paper is concerned with the relationship between labour share and unemployment in the major OECD countries. Special emphasis is put on examining whether the relationship has altered in a manner which can be interpreted as an indication of the weakened bargaining power of labour. The econometric analysis is based on the use of the theoretical framework which employs the notion of the wage curve as a central analytical tool. The investigation utilises cross-country panel data for twenty OECD countries over the period from 1972 to 2008 and statistical methods suitable for the examination of non-stationary panels. According to the results, the decline in the labour share, which is apparent in most major OECD countries, is highly likely due, at least partly, to the weakened bargaining power of labour. With a given level of unemployment, the labour share is nowadays lower than before.

Suggested Citation

  • Pekka Sauramo, 2011. "The relationship between labour share and unemployment: the role of wage-setting institutions," Working Papers 269, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    • Handle: RePEc:pst:wpaper:269
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    References listed on IDEAS

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    Cited by:

    1. Sitikantha Pattanaik & Silu Muduli & Soumyajit Ray, 2020. "Inflation expectations of households: do they influence wage-price dynamics in India?," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 13(3), pages 244-263, September.

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    More about this item

    Keywords

    Labour share; Unemployment; Wage curve; Bargaining coordination; Bargaining power;
    All these keywords.

    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
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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