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The distributional effects of labour market deregulation: Wage share and fixed-term contracts

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  • Amendola, Marco
  • Ciampa, Valerio
  • Germani, Lorenzo

Abstract

Since the 1980s, most advanced economies have massively ‘flexibilized’ their labour markets by reducing the protection against layoffs and introducing temporary and flexible contracts. Concurrently, a well-established economic stylized fact – the stability of the wage share of income – has been challenged as empirical evidence reveals a substantial decline in labour share across numerous countries. In this study, we aim to empirically investigate the causal link between these two phenomena by examining the impact of changes in the regulation of fixed-term contracts, as measured by variation over time in the temporary contracts EPL index, on the functional distribution of income. We employ Jordà’s local projection method for a panel of 18 advanced countries over the period 1985–2019 and show that reforms that deregulate fixed-term contracts consistently reduce the wage share.

Suggested Citation

  • Amendola, Marco & Ciampa, Valerio & Germani, Lorenzo, 2024. "The distributional effects of labour market deregulation: Wage share and fixed-term contracts," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 328-338.
    • Handle: RePEc:eee:streco:v:69:y:2024:i:c:p:328-338
    DOI: 10.1016/j.strueco.2023.12.013
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    More about this item

    Keywords

    Wage share; Labour market reforms; Temporary employment; Income distribution; Panel local projections;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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