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Real wage productivity elasticity across advanced economies, 1963-1996

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  • Scott Carter

Abstract

The question of a constant wage share (Bowley's Law) has long been both an empirical and theoretical point of contention between rival theories of macroeconomic (functional) distribution. This paper explores some of these theoretical debates and issues related to Bowley's Law in contextualizing a simple empirical test of the real wage productivity elasticity of a cross section of 15 advanced economies across the 34-year period from 1963 to 1996. The evidence supports the hypothesis of a structural break in functional distribution on or around 1979 when real wages exhibit productivity inelasticity and the share of wages in national income starts a downward trajectory almost across the board. This is especially striking given the wide variety of labor market institutions and conditions across the 15 advanced economies. The paper concludes by posing the question that in light of the evidence presented perhaps a possible rethinking is in order (especially vis-à-vis possible national union strategies) regarding Marx's predictions on the fate of the working class as capitalism progresses.

Suggested Citation

  • Scott Carter, 2007. "Real wage productivity elasticity across advanced economies, 1963-1996," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(4), pages 573-600.
    • Handle: RePEc:mes:postke:v:29:y:2007:i:4:p:573-600
    DOI: 10.2753/PKE0160-3477290403
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    Cited by:

    1. D., Ivan, 2017. "Stability of the labour shares: evidence from OECD economies," MPRA Paper 79822, University Library of Munich, Germany.
    2. Jackson, William A., 2014. "The Factor-Shares Cycle and its Relation to the Business Cycle," EconStor Open Access Book Chapters, in: Business Cycles in Economics: Types, Challenges and Impacts on Monetary Policies, pages 11-26, ZBW - Leibniz Information Centre for Economics.
    3. repec:ilo:ilowps:470930 is not listed on IDEAS
    4. Storm, Servaas. & Naastepad, C.W.M.,, 2012. "Wage-led or profit-led supply : wages, productivity and investment," ILO Working Papers 994709303402676, International Labour Organization.
    5. Ivan D. Trofimov, 2019. "Stability of Labour Shares: Evidence from OECD Economies," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 17(1), pages 57-89.
    6. Rudy Fichtenbaum, 2009. "The Impact of Unions on Labor's Share of Income: A Time-Series Analysis," Review of Political Economy, Taylor & Francis Journals, vol. 21(4), pages 567-588.
    7. C.W.M. Naastepad & Servaas Storm, 2010. "Feasible Egalitarianism: Demand-led Growth, Labour and Technology," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 15, Edward Elgar Publishing.
    8. Juin‐Jen Chang & Li‐Wen Hung & Shin‐Kun Peng, 2023. "(De)unionization, trade, unemployment, and wage differentials," Southern Economic Journal, John Wiley & Sons, vol. 90(1), pages 121-155, July.
    9. Parui, Pintu, 2015. "Government Expenditure and Economic Growth: A Demand-side Analysis," MPRA Paper 66855, University Library of Munich, Germany, revised 30 Dec 2019.

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