The Role of Global and Sectoral Factors in Labour Share Fluctuations
Project ID: GaSLS 746100
From 03.07.2017 to 03.03.2019, completed project
Funded under: Horizon 2020
Coordinator: Bank of Greece
Legal Entity Appointed Representative (LEAR): Dimitrios Malliaropulos, Director of the Economic Analysis and Research Department
Title: MSCA-IF-2016 - Individual Fellowships
Secondment to: Organisation for Economic Cooperation and Development (OECD)
Type of action: Society and Enterprise Panel
Research Fellow: Dr Aikaterini Karadimitropoulou
The project investigated the distribution of national income between profits and wages as proxied by the labour share in national income. The focus was on identifying the empirical regularities of factor shares across developed and emerging economies and across industries.
In 1957, Kaldor established the stability of the labour share in total income over time. This finding, which has implications for macroeconomic dynamics, the shape of the production function and inequality, led social scientists to remain 'silent' and to neglect research on the labour share for many decades. Standard neoclassical growth and business cycle models, following Kaldor’s stylised fact, assume a one-to-one substitution between capital and labour.
However, the recent observation of a declining labour share points to an incomplete understanding of macroeconomic dynamics and to potentially erroneous policy implications drawn from these models. This has renewed the interest of macroeconomists in revealing the causes behind this decline.
The study on the fluctuations of the labour share from a solid empirical standpoint provides the broad community of social science academics and policy-makers with a better understanding of the behaviour of the labour share.
In particular, this project aims (i) to reconcile the existing literature on the sources of labour share decline by examining a large set of driving forces and their relationship to key macroeconomic variables and (ii) to provide a descriptive analysis of the labour share from a multi-sector and multi-country perspective, as well as a decomposition of the labour share into national and external factors.
This project thus links the academic literature and policy-makers’ interests in issues such as what should be the appropriate response of governments to the observed decline of the labour share and its implications for fiscal and monetary policy.
What is the social impact?
The study on the impact of the labour share from a solid empirical macroeconomic standpoint provides the broad community of social science academics and the policy-makers with a better understanding of the behaviour of the labour share, and of its effects on key macroeconomic variables. It thus helps draw attention to the important role of income shares, which has been neglected so far by economic science.
Therefore, there is no better way to address the questions that have arisen in relation to the distribution of labour share than having both ends of the spectrum (i.e. researchers and policy-makers) represented and working together to provide empirical policy-making. This is exactly the opportunity provided by the Marie Curie Fellowship Programme.
What are the Marie Sklodowska Curie Actions?
The Marie Sklodowska-Curie Actions (MSCA) provide grants for doctoral candidates or experienced researchers and enable research-focused organisations (universities, research institutes and companies) to host talented foreign researchers and to create strategic partnerships with leading institutions worldwide.
The MSCA are funded under the European Commission’s Horizon 2020 programme and represent the most prestigious and competitive EU-funded research fellowship scheme.
The MSCA aim to equip researchers with the necessary skills and international experience for a successful career, either in the public or the private sector. The programme responds to the challenges sometimes faced by researchers, offering them attractive working conditions and the opportunity to move between academic and other settings.