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Technological Advance and the Labour Share of National Income in the European Union

Author

Listed:
  • Lino Briguglio

    (University of Malta)

  • Melchior Vella

    (University of Malta)

Abstract

This article tests the hypothesis that member states of the EU have been experiencing a declining share of labour income due to technological advance. It discusses factors that lead to the fall in the labour share, including technological advance, which is a tendency found in the capitalist system. We also identify the undesirable effects of a fall in the labour shares. The results of an econometric test conducted in our study, based on a labour demand equation that was derived from the CES production function, confirm the hypothesis that technological progress negatively affected the labour share of income, everything else remaining constant. This finding has important implications for EU Member States, namely that some form of policy intervention would seem to be necessary, as technological progress could lead to a continuing fall in the share of labour income if left to its own devices.

Suggested Citation

  • Lino Briguglio & Melchior Vella, 2014. "Technological Advance and the Labour Share of National Income in the European Union," Journal of Income Distribution, Ad libros publications inc., vol. 23(3), pages 35-58, November.
    • Handle: RePEc:jid:journl:y:2014:v:23:i:3-4:p:35-58
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    More about this item

    Keywords

    share of labour income; inequality; technological advance; globalisation; CES production function; labour demand;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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