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How does institutional risk affect the labour share of income? An analysis for the period from 1996 to 2019
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Orientador(es)
Resumo(s)
Using a panel of 26 OECD countries from 1996 to 2019, we analyze the statistical correlation
between institutional risk and the labour share. In theory, poor institutional quality increases risk,
which takes the form of high unexpected costs and profit volatility. Firms react to such risk by pro viding workers an ”insurance wage” that is stable but lower than what marginal productivity would
dictate, compensating for the possibility of profit instability. Our results suggest that institutional
quality, proxied by indicators such as Rule of Law enforcement, Corruption Control, or Government
Effectiveness, has a positive and significant effect on the labour share.
Descrição
Palavras-chave
Labour share of income Risk Institutions Functional distribution of income Fixed effects