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Labour and Financial crisis: is labour paying the price of the crisis ?

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  • Rémi BAZILLIER
  • Boris Najman

Abstract

This paper investigates the relationship between the labour share and financial crises. While Diwan (2001) or Maarek et al. (2013) focused on the currency crisis, we propose to see if their analyses can be extended to the banking crisis and how it can influence the relative bargaining power of labour and capital within firms. To this end, we use international panel data of the share of labour in GDP. We confirm the existence of a negative trend for the labour share, which is largely explained by financial crises. However, the results differ for currency and banking crises. Currency crises affect the labour share negatively, while banking crises primarily affect capital income, at least during the year of the crisis. In the three years following a currency crisis, the labour share tends to be reduced by around 2% per year on average.
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  • Rémi BAZILLIER & Boris Najman, 2010. "Labour and Financial crisis: is labour paying the price of the crisis ?," LEO Working Papers / DR LEO 982, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    • Handle: RePEc:leo:wpaper:982
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    Cited by:

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    2. Herradi, Mehdi El & Leroy, Aurélien, 2022. "The rich, poor, and middle class: Banking crises and income distribution," Journal of International Money and Finance, Elsevier, vol. 127(C).
    3. Rémi Bazillier & Jérôme Hericourt, 2017. "The Circular Relationship Between Inequality, Leverage, And Financial Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 463-496, April.
    4. Ibarra, Carlos A. & Ros, Jaime, 2019. "The decline of the labor income share in Mexico, 1990–2015," World Development, Elsevier, vol. 122(C), pages 570-584.
    5. Kraft, Kornelius & Lammers, Alexander, 2021. "Bargaining Power and the Labor Share - a Structural Break Approach," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242342, Verein für Socialpolitik / German Economic Association.
    6. Omar Osman, 2021. "Income Inequality and Financial Disturbances: Does Income Inequality Engender Financial Crises?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 157(2), pages 417-442, September.
    7. Bodea, Cristina & Houle, Christian & Kim, Hyunwoo, 2021. "Do financial crises increase income inequality?," World Development, Elsevier, vol. 147(C).
    8. Paul Maarek & Elsa Orgiazzi, 2014. "Labor Share and development," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201410, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    9. Bruno Ćorić & Rangan Gupta, 2023. "Economic disasters and inequality: a note," Economic Change and Restructuring, Springer, vol. 56(5), pages 3527-3543, October.

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    More about this item

    Keywords

    Financial Crisis; Social Protection; Labour Share;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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