Publisher:
The University of Utah, Department of Economics, Salt Lake City, UT
Abstract:
We explore four decades of cyclical and long-run dynamics in income distribution and economic activity for a panel of thirteen OECD countries. Based on predator-prey dynamics, we find that the business cycle is weakly profit-led , and that the long-run equilibrium has been shifting towards a lower wage share. We hypothesize that a race to the bottom can arise from a need to be competitive in globalized markets. While globalization does have a negative effect on the wage share, other factors and trends have independent influences. Unionization is pro-labor, while contractionary monetary policy, R&D spending and more financialization are anti-labor.
