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The political economy of income distribution: industry level evidence from 14 OECD countries

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  • Guschanski, Alexander
  • Onaran, Özlem

Abstract

This article presents an econometric estimation of the determinants of the wage share, using sectoral data for 14 OECD countries for the period 1970- 2014. We present estimations for the wage share of high- and low-skilled workers and within manufacturing and service industries. We augment sectoral data with input-output tables and union density data to obtain detailed estimations of the effect of technological change, globalisation and bargaining power on the wage share. We find a significant negative effect of globalisation and we discover offshoring to emerging markets to be a robust driver of this process. Technological change had an impact which differs by skill group, but theoretical issues and lack of robustness of the results cast doubt on the hypothesis of skill-biased technological change as a key factor in the overall decline in the wage share. Furthermore, we find a robust effect of institutional factors such as union density and minimum wages on the wage share, lending strong support to the political economy approach to functional income distribution.

Suggested Citation

  • Guschanski, Alexander & Onaran, Özlem, 2017. "The political economy of income distribution: industry level evidence from 14 OECD countries," Greenwich Papers in Political Economy 17518, University of Greenwich, Greenwich Political Economy Research Centre.
    • Handle: RePEc:gpe:wpaper:17518
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Guschanski, Alexander & Onaran, Özlem, 2018. "The labour share and financialisation: Evidence from publicly listed firms," Greenwich Papers in Political Economy 19371, University of Greenwich, Greenwich Political Economy Research Centre.
    2. Karsten Kohler & Alexander Guschanski & Engelbert Stockhammer, 2019. "The impact of financialisation on the wage share: a theoretical clarification and empirical test," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(4), pages 937-974.
    3. Tippet, Benjamin & Onaran, Özlem & Wildauer, Rafael, 2021. "The determinants of wealth inequality in the UK, USA and France," Greenwich Papers in Political Economy 31260, University of Greenwich, Greenwich Political Economy Research Centre.
    4. Guschanski, Alexander & Onaran, Özlem, 2017. "Why is the wage share falling in emerging economies? Industry level evidence," Greenwich Papers in Political Economy 17536, University of Greenwich, Greenwich Political Economy Research Centre.
    5. Coveri, Andrea & Pianta, Mario, 2022. "Drivers of inequality: wages vs. profits in European industries," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 230-242.
    6. Nolan, Brian & Richiardi, Matteo & Valenzuela, Luis, 2018. "The Drivers of Inequality in Rich Countries," MPRA Paper 89806, University Library of Munich, Germany.
    7. Onaran, Özlem & Guschanski, Alexander, 2018. "The causes of falling wage share: sectoral and firm level evidence from developed and developing countries – what have we learned?," Greenwich Papers in Political Economy 19373, University of Greenwich, Greenwich Political Economy Research Centre.
    8. Alexander Guschanski & Özlem Onaran, 2018. "Determinants of the Wage Share: A Cross-country Comparison Using Sectoral Data," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 19(02), pages 44-54, July.
    9. repec:ces:ifofor:v:19:y:2018:i:2:p:44-54 is not listed on IDEAS
    10. Ignacio ÁLVAREZ & Maarten KEUNE & Jesús CRUCES & Jorge UXÓ, 2021. "Missing links in the inclusive growth debate: Functional income distribution and labour market institutions," International Labour Review, International Labour Organization, vol. 160(3), pages 337-362, September.

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    More about this item

    Keywords

    wage share; income distribution; union density; technology; offshoring;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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