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The Micro-level Dynamics of Declining Labour Share: Lessons from Finnish Great Leap


  • Kyyrä, Tomi
  • Maliranta, Mika


In contrast with the experiences of the UK and the US, the distribution of labour and capital income has changed sharply in favour of capital in most Continental European and Nordic countries during the past two decades. We examine forces behind the evolution of the aggregate labour share by analysing the dynamics of labour shares within and between firms/plants in the Finnish business sector. Using a decomposition method applied in labour economics and productivity analysis, we show that much of the decline in the aggregate labour share stems from the reallocation of resources between firms and plants, while labour shares at the firm/plant level have remained relatively stable. Pienenevän työn tulo-osuuden mikrotason dynamiikka : Kokemuksia suomalaisesta suuresta harppauksesta

Suggested Citation

  • Kyyrä, Tomi & Maliranta, Mika, 2006. "The Micro-level Dynamics of Declining Labour Share: Lessons from Finnish Great Leap," Discussion Papers 1049, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1049

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    Cited by:

    1. Kosonen, Tuomas, 2007. "The Increased Revenue from Finnish Corporate Income Tax in the 1990s," Discussion Papers 421, VATT Institute for Economic Research.
    2. Jalava, Jukka & Aulin-Ahmavaara, Pirkko & Alanen, Aku, 2007. "Intangible Capital in the Finnish Business Sector 1975-2005," Discussion Papers 1103, The Research Institute of the Finnish Economy.

    More about this item


    factor income shares; wage policy; decomposition; productivity;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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