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Labour income share, market power and automation: Evidence from an emerging economy

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  • Jacob, Tinu Iype
  • Paul, Sunil

Abstract

The macroeconomic implications of movements in labour income share across several economies are of serious concern. This study examines the relationship between labour income share and its key drivers: market power, capital intensity and automation. The study uses data on Indian firms from 2013 to 2021. The relationship is analysed by employing panel fixed effects and method of moments panel quantile estimators. The results indicate that market power is significantly and negatively associated with the labour share of income. Similarly, capital intensity and automation have a positive impact on the labour income share. Estimates of quantile regression reveal that the influence of market power and automation becomes more pronounced at higher quantiles of the labour share. In general, the relationship is consistent even after accounting for firm size and ownership type. The study also indicate complementary nature of labour and capital.

Suggested Citation

  • Jacob, Tinu Iype & Paul, Sunil, 2024. "Labour income share, market power and automation: Evidence from an emerging economy," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 37-45.
    • Handle: RePEc:eee:streco:v:69:y:2024:i:c:p:37-45
    DOI: 10.1016/j.strueco.2023.11.016
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    More about this item

    Keywords

    Labour income share; Market power; Markups; Automation;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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