Table 2 — Determinants of labour share — OLS regressions
robust standard errors - t-statistics in parentheses - * significant at 10%; ** significant at 5%; ***
significant at 1%
|
1 |
2 |
3 | |
|
log capital per worker |
-0.036 |
10.98 |
8.56 |
|
[0.04] |
[16.19]*** |
[12.49]*** | |
|
unemployment benefit |
1.236 |
1.583 |
3.094 |
|
[1.03] |
[0.72] |
[1.73]* | |
|
union density rates |
5.529 |
11.714 |
-1.054 |
|
[4.59]*** |
[5.94]*** |
[0.65] | |
|
ratio minimum/median wage |
-2.37 |
9.298 |
3.768 |
|
[2.99]*** |
[3.28]*** |
[1.42] | |
|
log oil price in national currency |
-0.425 |
0.957 |
-0.91 |
|
[3.94]*** |
[7.30]*** |
[3.63]*** | |
|
average years of education |
0.537 |
-4.143 |
-1.221 |
|
[3.03]*** |
[13.35]*** |
[1.78]* | |
|
Constant |
yes |
yes |
yes |
|
Country fixed effects |
yes |
yes | |
|
Year fixed effects |
yes | ||
|
Observations |
455 |
455 |
455 |
|
R2 |
0.19 |
0.80 |
0.88 |
Our results are in line with those obtained in earlier work. Bentolila and Saint Paul (2003), who
consider sectoral data for 12 countries over a shorter time span, find a significant correlation between the
labour share (corrected for self-employment) and the capital-output ratio, strike activity, employment
adjustment costs (proxied by previous changes in employment) and total factor productivity, whereas the
oil price is found to be statistically insignificant. While the sign of the coefficient on the capital-output
ratio varies across sectors (depending on the degree of substitutability/complementarity between factors),
they find a weakly significant negative coefficient on strike activity, which they interpret as lagged
responses to wage push. Blanchard (1997) finds that labour share movements are mainly affected by
supply shocks, with significant reaction lags. Our results hence support the traditional view that factor
shares respond to relative factor endowments (here proxied by capital per worker) but that there is
evidence that wage push factors (union density, minimum wage and unemployment benefit) also have
some impact.
In table 3 we report the determinants of the wage differential. The most significant correlations
are found with factor endowments: an increase in the capital-labour ratio reduces the wage ratio because
unskilled workers exploit relatively better the improved employment situation; while an increase in skill
availability in the labour force (proxied by our human capital variable) tends to depress the relative wage.
Once again we find a significant impact of labour market institutions. Not surprisingly, the minimum wage
reduces wage differentials. The unemployment benefit, which according to the model has an ambiguous
effect as it increases both skilled and unskilled wages, also seems to reduce wage dispersion. Some
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