TY - JOUR
T1 - Capitalism and labor shares
T2 - A cross-country panel study
AU - Young, Andrew T.
AU - Lawson, Robert A.
PY - 2014/3
Y1 - 2014/3
N2 - We examine the empirical relationship between the institutions of economic freedom and labor shares in a panel of up to 93 countries covering 1970 through 2009. We find that a standard deviation increase in the Fraser Institute's Economic Freedom of the World (EFW) score is associated with about a 1/3 standard deviation increase in a country's labor share. Starting from the sample mean labor share in our panel, this amounts to about 4.26. percentage points. This relationship is robust to considering OECD and non-OECD samples separately. It is also (both qualitatively and quantitatively) robust to controlling for differences in human capital levels, labor productivity, trade union density, and international economic flows. Breaking the EFW into its individual component areas, the regulation of credit, business and labor appears to be the most important source of the positive EFW-labor share relationship.
AB - We examine the empirical relationship between the institutions of economic freedom and labor shares in a panel of up to 93 countries covering 1970 through 2009. We find that a standard deviation increase in the Fraser Institute's Economic Freedom of the World (EFW) score is associated with about a 1/3 standard deviation increase in a country's labor share. Starting from the sample mean labor share in our panel, this amounts to about 4.26. percentage points. This relationship is robust to considering OECD and non-OECD samples separately. It is also (both qualitatively and quantitatively) robust to controlling for differences in human capital levels, labor productivity, trade union density, and international economic flows. Breaking the EFW into its individual component areas, the regulation of credit, business and labor appears to be the most important source of the positive EFW-labor share relationship.
KW - Capitalism
KW - Distribution of income
KW - Economic freedom
KW - Institutions
KW - Labor share
KW - Political economy
UR - http://www.scopus.com/inward/record.url?scp=84890848056&partnerID=8YFLogxK
U2 - 10.1016/j.ejpoleco.2013.11.006
DO - 10.1016/j.ejpoleco.2013.11.006
M3 - Article
AN - SCOPUS:84890848056
VL - 33
SP - 20
EP - 36
JO - European Journal of Political Economy
JF - European Journal of Political Economy
SN - 0176-2680
ER -