EconStor >
Queen Mary, University of London >
School of Economics and Finance, Queen Mary, University of London  >
Working Paper Series, School of Economics and Finance, Queen Mary, University of London  >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/55200
  
Title:Inequality and employment sensitivities to the falling labour share PDF Logo
Authors:Karanassou, Marika
Sala, Hector
Issue Date:2011
Series/Report no.:Working Paper // School of Economics and Finance, Queen Mary, University of London 680
Abstract:This paper aims at identifying the labour share (wage-productivity gap) as a major factor in the evolution of inequality and employment. To this end, we use annual data for the US, UK and Sweden over the past forty years and estimate country-specific systems of labour demand and Gini coefficient equations. Further to the statistical significance of our models, we validate their economic significance through counterfactual simulations. In particular, we evaluate the contributions of the labour share to the trajectories of inequality and employment during specific time intervals in the post-1990 years. We find that during the nineties the cost of a one percent increase in employment was in the range of 0.7%-0.9% higher inequality in all three countries. However, in the 2000s, whereas the inequality-employment sensitivity ratio slightly fell in the US, it exceeded unity in the countries on the other side of the Atlantic. It obtained its highest value in the UK, where a 1% growth in employment was achieved at the expense of 1.3% worsening in income inequality. In the light of the significant influence of the time-varying labour share on the inequality and employment time paths documented in our sample, the evolution of the wage-productivity gap deserves the attention of policy makers.
Subjects:income inequality
labour income share
employment
JEL:D30
E25
E24
Document Type:Working Paper
Appears in Collections:Working Paper Series, School of Economics and Finance, Queen Mary, University of London

Files in This Item:
File Description SizeFormat
663442168.pdf325.39 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/55200

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.