The Causes of Falling Wage Share and Prospects for Growth with Equality in a Globalized Economy

This research project analyzes the determinants of wage share, taking account of country-specific institutional aspects, in order to contribute to the theory of distribution, combining insights from political economy, institutional economics, and industrial relations.

There has been a significant decline in the share of wages in GDP in both
developed and developing countries since the 1980s. This was accompanied by another trend towards greater inequality in personal income distribution, particularly by increases in income shares of the top 1% of the distribution. These developments indicate a clear reversal of the trends towards relatively egalitarian income distribution during the post-war era. Empirically, this project estimates the effects of both firm- and sector-specific factors and macroeconomic factors and decomposes the effects of technological change, globalization, labor market institutions, financialization, changes in the composition of government spending, rise in personal income inequality, and market concentration. The research fills the gaps in the literature by developing more detailed measures of welfare state retrenchment, financialization, globalization, and bargaining power.

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