The Wage-Productivity Gap Revisited:: Is the Labour Share Neutral to Employment?
-
Marika Karanassou [1] ; Hector Sala Lorda [2]
-
[1] University of London
University of London
Reino Unido
-
[2] Universitat Autònoma de Barcelona
Universitat Autònoma de Barcelona
Barcelona, España
-
- Localización: Working papers (Universitat Autònoma de Barcelona. Departament d'Economia Aplicada), Nº. 6 (Juliol 2010), 2010
- Idioma: inglés
- Enlaces
-
Resumen
This paper challenges the prevailing view of the neutrality of the labour incomeshare to labour demand, and investigates its impact on the evolution of employment.Whilst maintaining the assumption of a unitary long-run elasticity of wages withrespect to productivity, we demonstrate that productivity growth affects the labourshare in the long run due to frictional growth (that is, the interplay of wage dynamicsand productivity growth). In the light of this result, we consider a stylised labourdemand equation and show that the labour share is a driving force of employment.We substantiate our analytical exposition by providing empirical models of wagesetting and employment equations for France, Germany, Italy, Japan, Spain, theUK, and the US over the 1960-2008 period. Ourfindings show that the time-varying labour share of these countries has significantly influenced their employmenttrajectories across decades. This indicates that the evolution of the labour incomeshare (or, equivalently, the wage-productivity gap) deserves the attention of policymakers.
