Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/222686 
Year of Publication: 
2019
Series/Report no.: 
ADBI Working Paper Series No. 919
Publisher: 
Asian Development Bank Institute (ADBI), Tokyo
Abstract: 
Summary statistics on the labor share of income show that between-country variation is much greater than within-country variation: functional income distribution is determined by factors which change substantially across countries but are persistent over time. This article attempts to shed some light on the long-run and political economy determinants of the labor income share. We revisit and extend previous empirical research on democratic political institutions and the labor share using a dataset of 112 countries over the period 1970-2015. Our empirical analysis shows that democracy allows workers to appropriate a higher share of national income. The evidence is robust to different indices of democracy and different periods of time, and after performing instrumental variable estimation. These results are particularly relevant today, in light of the recent global decline in the labor income share and current crisis of democracy.
Subjects: 
labor share
factor income distribution
democracy
political economy
institutions
JEL: 
E25
P16
O15
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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