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The impact of labor share on economic growth: a panel data analysis for European Union

Author

Listed:
  • José Alves
  • Francisco Baptista
  • José Carlos Coelho

Abstract

A panel data analysis was conducted for European Union (EU) countries spanning from 1995 to 2019 to gain insights into the impact of labor share on economic growth. The primary objective was to ascertain whether labor share actually remains less influential than capital share on economic growth, or if the changing landscape over the years necessitates a policy adjustment for optimizing economic growth. Notably, wage share exhibits a positive influence on economic growth when it experiences positive growth and when is higher than growth of total factor productivity. These results challenge conventional wisdom and suggest that economic policies may need to adapt to the evolving dynamics of labor share and its impact on growth.

Suggested Citation

  • José Alves & Francisco Baptista & José Carlos Coelho, 2024. "The impact of labor share on economic growth: a panel data analysis for European Union," Working Papers REM 2024/0319, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp03192024
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    References listed on IDEAS

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    More about this item

    Keywords

    economic growth; labor share; total factor productivity; first-differences Generalized Method of Moments.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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