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Globalization, Creative Destruction, and Labor Share Change: Evidence on the Determinants and Mechanism from Longitudinal Plant-level Data


  • Maliranta, Mika
  • Böckerman, Petri


We examine the sources and micro-level mechanisms of the changes in the labor share of value added. We link the micro-level dynamics of the labor share change with that of productivity and wage growth. Using a useful variant of the decomposition method we make a distinction between the change in the average plant and the micro-level restructuring. With Finnish plant-level data covering three decades we show that micro-level restructuring is the link between the declining labor share and increasing productivity in 12 manufacturing industries of four regions, and that increased international trade is a factor underlying those shifts.

Suggested Citation

  • Maliranta, Mika & Böckerman, Petri, 2009. "Globalization, Creative Destruction, and Labor Share Change: Evidence on the Determinants and Mechanism from Longitudinal Plant-level Data," Discussion Papers 1178, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1178

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    References listed on IDEAS

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    Cited by:

    1. Kauhanen, Antti & Maliranta, Mika, 2012. "Micro-components of aggregate wage dynamics," ETLA Working Papers 1, The Research Institute of the Finnish Economy.
    2. Fornaro, Paolo & Luomaranta, Henri, 2015. "Small Versus Large Firms Employment Patterns in Finland: a Comparison," MPRA Paper 66979, University Library of Munich, Germany.
    3. Hernando Zuleta, 2015. "Factor shares, inequality, and capital flows," Southern Economic Journal, Southern Economic Association, vol. 82(2), pages 647-667, October.
    4. 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.
    5. Yu Zheng & Raul Santaeulalia & Dongya Koh, 2015. "Labor Share Decline and the Capitalization of Intellectual Property Products," 2015 Meeting Papers 844, Society for Economic Dynamics.
    6. Benjamin Bridgman, 2014. "Is Labor's Loss Capital's Gain? Gross versus Net Labor Shares," BEA Working Papers 0114, Bureau of Economic Analysis.
    7. Fornaro, Paolo & Luomaranta, Henri, 2017. "Small and Medium Firms, Aggregate Productivity and the Role of Dependencies," ETLA Working Papers 47, The Research Institute of the Finnish Economy.

    More about this item


    globalization; international trade; foreign ownership; micro-level restructuring; labor share;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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