Why have wage shares fallen? Determinants of functional income distribution. Part of the International Labour Organisation (ILO) project “New Perspectives.

Why have wage shares fallen? Determinants of functional income distribution.Part of the International Labour Organisation (ILO) project “New Perspectives on Wages and Economic Growth”

March 2013

Engelbert StockhammerResearch assistence: Hubert Kohler

Kingston University

ILO Project: New Perspectives on Wages and Economic Growth: The

potentials of “wage-led growth”• Wage-led growth: Concept, theories and policies - Marc Lavoie

and Engelbert Stockhammer• Why have wage shares fallen? An analysis of the determinants

of functional income distribution -Engelbert Stockhammer• Is aggregate demand wage-led or profit-led? a global model -

Özlem Onaran and Giorgos Galanis• Wage-led or Profit-led Supply: Wages, Productivity and

Investment - Servaas Storm and C.W.M. Naastepad• The role of income inequality as a cause of the Great Recession

and global imbalances - Till van Treeck and Simon Sturn • Financialisation, the financial and economic crisis, and the

requirements and potentials for wage-led recovery - Eckhard Hein and Matthias Mundt

3

Motivation

• Since early 1980 dramatic changes in income distribution → lit on personal income distr

• wage shares have been falling • Well documented for OECD countries, less so for developing economies

• Until recently little research, then a series of publications on OECD countries, ... but little on functional distribution in developing countries

• ILO project on ‚wage-led growth‘ • Aim of paper: identify the relative impacts of financialisation,

globalisation, technological change and welfare state retrenchment• Panel 71 countries (28 ADV, 43 DVP), max1970-2007 (in fact: mid

80s-early 2000s) • Panel of ALL as well as developing (DVP) economies• Panel for ADV

4

Mainstream story

• IMF (2007a, p. 161)• globalization is one of several factors that have acted to reduce the

share of income accruing to labor in advanced economies, although rapid technological change has had a bigger impact (…) .

• countries that have enacted reforms to lower the cost of labor to business and improve labor market flexibility have generally experienced a smaller decline in the labor income share.

• EC (2007, p. 260) • “for the period for which the data is available (i.e. from the mid-1980s

to early 2000s), the estimation results clearly indicate • that technological progress made the largest contribution to the fall in

the aggregate labour income share“ • “Globalisation also had a negative impact on the aggregate labour

income share but to a lesser extent”

outline

• framework• Literature• Data• Results

• ALL, DVP• ADV

• conclusion

5

Adjusted Wage Share in advanced (ADV) economies

6

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

60.0

65.0

70.0

75.0

80.0

85.0

ADVJPNUSADEU

Adjusted Wage Share in developing (DVP) economies

7

19701971

19721973

19741975

19761977

19781979

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

200650.0

55.0

60.0

65.0

70.0

75.0

DVP3DVP5DVP16

Personal income distribution USA

9

19511953

19551957

19591961

19631965

19671969

19711973

19751977

19791981

19831985

19871989

19911993

19951997

19992001

20032005

20072009

0

2

4

6

8

10

12

14

16

18

Income share of the top 1% of the income distribution, UK

UK -Top 1% (MC & SA)UK -Top 1% (A)

Correlation top1% and WS

10

AUS -0.68 FIN -0.72 ARG -0.86CAN -0.43 FRA -0.61 CHN -0.83IRL -0.76 ITA -0.83 IDN -0.14GBR -0.71 NLD 0.46 IND -0.18USA -0.80 PRT -0.15 ZAF -0.67

ESP -0.16SWE -0.54JPN -0.30

Framework and comments on the literature

11

Literature on income distribution

• Lots of research on personal distribution• Mostly on advanced economies; labour econ and trade theory, often

micro• Few that combine cross country and time• Some lit on developing countries (Goldberg and Pavcnik 2007 JEL)

• Until recently little on functional distribution • Then a series of publications (EC 2007, IMF 2007, OECD 2007) on

OECD countries• Smaller literature on developing countries

• Includes capital account liberalisation prominently

• Daudey and Garcia-Penalosa (2007) negative correlation between changes in personal and functional income distribution (for large sample)

13

14

15

IMF (2007a), Jayadev (2008)

IMF (2007a)• Estimates adj WS = f(Glob, K/L, ICT, TW, UB)

• Glob: Px, Pm, offshoring, imigration• 18 OECD countries 1983-2002, annual data• Panel (OLS with some robustness checks)

• Story: decline in WS most of all caused by tech change, globalization contributed to decline in WS• Then disaggregate for skilled WS and unskilled WS

Jayadev (2008)• WS = f(Ypc, CA openness [legal], trade openness, tariffs,

int, gov’t share)• 62-89 countries

16

Main factors in the literature

• Technological change• Globalisation• Financialisation• Welfare state retrenchment (or ‘bargaining

power’, LMI)

17

Technological change

• Argument come from discussion of personal distribution• Tech change, in particular ICT favors skilled workers

(complements to ICT) and hurts unskilled workers (substitutes of ICT)

• Overall this leads to a fall in the wage share• Tech change partly implemented through outsourcing

• Variables in empirical research• K-L ratio (Bentolila and Saint-Paul 2003)• Time trends (Ellis and Smith 2007, Guscina 2006: after

1985)• K-L ratio and ICT: IMF (2007a, EC 2007)

18

Globalisation: Stolper-Samuleson vs Political Economy approach • Stolper-Samuelson: changes of relative prices of labor and capital;

abundant factor wins• Outsourcing as a particular form of it• =/= bargainging: mobile factor wins, threat effects (Rodrik)

• General econ perception at odds with specialized literature• Problems of SS & HO: comparative advantage can‘t explain actual trade pattern; assumes full

employment, homog labour ...

• Stolper-Samuleson predicts positive effect of globalisation on WS in developing economies

• but globalization led to increased inequality in developing economies (Goldberg and Pavcnik 2007 JEL)

• Rodrik, Harrison, Jayadev find negative effect on WS in developing countries

• variables• Trade openness (EC 2007)• FDI, outsourcing, ToT (IMF 2007a)• Tariffs (IMF 2007b, Rodrik 1998)

19

Financialisation

• Increasing importance of financial sector and financial investors („shareholder value orientation“)

• has shifted power relation at the expense of labor • ILO (2008), Rossman (2009): shift in power relations• Ex: Private Equity firm buys industrial firm with debt, loads debt onto firm -> firm has to cut

costs to survive• Epstein and Powers (2003) document increase in rentier income

• has decreased investment -> unemployment• Stockhammer (2004), Lazonick and O‘Sullivan (2000): from ‚retain & reinvest‘

to ‚downsize & distribute‘

• variables• So far not included in econometric studies on the determinants of the wage

share• IMF (2007b): effect of financial globalization on personal income distribution• Cap Account openness (Jayadev 2007)

20

ILO 2008 World of Word Report

• “financial liberalization that has contributed to growing inequality in some industrialized countries is the even greater importance attached to “shareholder value” maximization and to private equity funds in corporate management. The demand for higher dividend payouts by active shareholders has made managers more resistant to claims for wage increases than in the past, while the threat of outsourcing and downsizing has weakened the bargaining position of workers” (ILO 2008, p. 50)

21

Welfare state retrenchment

• Welare state increases bargaining power of labour• Effect on wages depends on elastisticy of labor demand• Political science literature on ‚welfare state

retrenchment‘

• Variables• union density, various LMI (IMF 2007a, EC2007)

• LMI have ‚perverse‘ effect, implying very elastic labor demand• LMI: lab mkt flex or bargaining power?

• Gov’t share (Jayadev 2007)• strike (Bentolila and Saint-Paul: national variable in a

sectoral panel)

22

Determinants of income distribution

23

Overview baseline variablesWS = f(fin, tech, wfst, glob)

ALL/DVP ADVfinancialisation FINGLOB FINGLOBglobalisation OPEN OPEN

ToTWelfare state CG CG

UNIONTechnological change

GDPpwINDAG

KLICT

24

DataResults for ALL countriesResults for ADV countries

25

Baseline specification (ALL countries)• Baseline equation (ALL countries):

WS = f(∆y, FINGLOB, OPEN, GOVT, Y/L, IND, AG)• Variables for

• Globalisation: OPEN• Financialisation: FINGLOB• Technological + structural change: Y/L, IND, AG• Welfare state retrenchment: LMI, gov’t

26

Wage share (WS) adjustments

• Problem: self employment, informal sector• Adjusted WS: imputes formal wages to self employed• Some recommend: average between adj WS and WS• Further adjustments: keeping sectoral composition

constant (or at US levels), Kruger (1999), Gollin (2002)

• Note: I don’t do adjustments (or not) myself

• Private wage share (WSP)• WS = (1- CG)*WSP + CG*WSG• WSP = (WS-CG)/(1-CG)

27

Data & sourcesWSAP Adjusted private wage share (1) AMECO, (2) ILO, (3) national

∆y growth WB WDI

FINGLOB Financial globalisation

(Aext+Lext)/Y

IMF (Lane & M-F 07)

OPEN Openness (X+M)/Y WB WDI

ToT Terms of trade (1) AMECO, (2) IMF

CG Gov‘t consumption PENN

UNION Union density BD + BGHS

GDPpw GDP per worker PENN

AG Agricultural share PENN

ICT ICT services/Y KLEMS (ADV); ALL: Groningen

KL Capital labour ratio KLEMS

28

29

30

Robustness tests

• WS = f(∆y, finglob, open, govt, Y/L, ag, ind)• Obs 1450 (dvp 614)

• Estimation method• Fixed effects model: (annual) levels + autocorr correction• First differences (annual)• Non-overlapping 5 yr averages (NO5YA)• GMM

• Results by country groups (ADV vs DVP)• Robustness checks

• Finref• Other fin• LMI• Glob• By income group

31

Baseline specification (ALL)dep var: WSAP

32

coeff t-value

GROWTH -11.94 -4.17***

LOG(FINGLOB) -3.66 -6.99***

OPEN -3.81 -3.21***

LOG(GDPPW) -0.69 -0.32

CG 0.80 3.97***

AG -0.24 -2.72***

IND -0.16 -2.46**

obs 1450

adj r2 0.98

dw 1.72

Baseline specification (DEV)dep var: WSAP

33

coeff t-value

GROWTH -13.85 -3.47***

LOG(FINGLOB) -4.70 -5.30***

OPEN -4.07 -2.38**

LOG(GDPPW) 0.53 0.27

CG 0.79 3.07***

AG -0.21 -2.12**

IND -0.03 -0.30

obs 595

adj r2 0.98

dw 1.78

Table 3. Results for the baseline specification and variations

34

1 2 3 4 5 6 7 8 9GROWTH -11.936 -11.97 -12.32 -11.193 -11.603 -16.086 -9.913 -13.976 -20.581t-value -4.167*** -4.172*** -4.254*** -3.774*** -3.872*** -3.007*** -3.310*** -4.803*** -3.493***LOG(FINGLOB) -3.659 -3.677 -4.384 -3.046 -3.556 -2.551 -3.729 -3.251 -2.7t-value -6.997*** -6.932*** -5.258*** -5.141*** -7.017*** -2.554** -7.049*** -5.623*** -1.5OPEN -3.811 -4.02 -3.821 -6.225 -3.561 -5.775 -3.898 -3.913 -6.41t-value -3.211*** -2.540** -3.191*** -4.436*** -2.869*** -2.595*** -3.306*** -3.141*** -1.905*LOG(GDPPW) -0.658 -0.667 -1.155 -2.364 -4.098 -2.834 -0.62 -0.829 -6.382t-value -0.321 -0.325 -0.568 -1.138 -1.786* -0.616 -0.307 -0.396 -1.316CG 0.801 0.801 0.804 0.392 0.954 -0.049 0.824 0.731 -0.248t-value 3.975*** 3.972*** 3.995*** 2.052** 4.210*** -0.169 4.154*** 3.490*** -0.867AG -0.235 -0.236 -0.228 -0.139 -0.342 -0.421 -0.237 -0.235 -0.532t-value -2.719*** -2.721*** -2.621*** -1.338 -3.700*** -2.195** -2.744*** -2.683*** -2.464**IND -0.159 -0.158 -0.146 -0.261 -0.183 -0.339 -0.162 -0.152 -0.472t-value -2.457** -2.457** -2.208** -3.697*** -2.731*** -2.861*** -2.524** -2.324** -4.026***OPEN*D_HIGHIN 0.513 2.709t-value 0.248 0.779LOG(FINGLOB)*D_HIGHIN 1.238 0.343t-value 1.228 0.187TOT -4.22 -4.783t-value -3.253*** -1.573UNEMPL -0.315 -0.391t-value -4.743*** -4.030***LOG(ICT_CB) 0.26 0.04t-value 0.159 0.023D_CRISIS 0.878 0.261t-value 1.034 0.274D_EXCRIS -1.415 -1.457t-value -2.590*** -1.465obs 1450 1450 1450 1310 1302 664 1450 1427 629adj r2 0.981 0.981 0.981 0.982 0.975 0.977 0.981 0.981 0.975dw 1.719 1.719 1.715 1.675 1.741 1.701 1.71 1.69 1.829

Table 3. Results for the baseline specification and variations

35

1 2 3 4 5 6 7 8 9GROWTH -11.94 -11.97 -12.32 -11.19 -11.60 -16.09 -9.91 -13.98 -20.58LOG(FINGLOB) -3.66 -3.68 -4.38 -3.05 -3.56 -2.55 -3.73 -3.25 -2.70OPEN -3.81 -4.02 -3.82 -6.23 -3.56 -5.78 -3.90 -3.91 -6.41LOG(GDPPW) -0.66 -0.67 -1.16 -2.36 -4.10 -2.83 -0.62 -0.83 -6.38CG 0.80 0.80 0.80 0.39 0.95 -0.05 0.82 0.73 -0.25AG -0.24 -0.24 -0.23 -0.14 -0.34 -0.42 -0.24 -0.24 -0.53IND -0.16 -0.16 -0.15 -0.26 -0.18 -0.34 -0.16 -0.15 -0.47OPEN*D_HIGHIN 0.51 2.71LOG(FINGLOB)*D_HIGHIN 1.24 0.34TOT -4.22 -4.78UNEMPL -0.32 -0.39LOG(ICT_CB) 0.26 0.04D_CRISIS 0.88 0.26D_EXCRIS -1.42 -1.46obs 1450 1450 1450 1310 1302 664 1450 1427 629adj r2 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98dw 1.72 1.72 1.72 1.68 1.74 1.70 1.71 1.69 1.83

Table 10. Baseline specification and different estimation methods – adv countries

36

1 2 3 4 5 6 7 8FE diff 5yr GMM FE diff 5yr GMM

lag.dep.var 0.479 0.293GROWTH -16.434 -11.044 -75.851 -25.229 -16.27 -12.153 -70.857 -11.836LOG(FINGLOB) -2.418 -1.286 -6.199 -1.185 -2.14 -0.906 -6.203 -2.45OPEN -5.888 -8.095 4.32 3.504 -6.566 -7.778 1.992 -8.478TOT -4.546 -3.256 1.391 -3.603 -4.662 -3.033 -0.045 -9.81CG 0.929 1.483 -1.034 0.558 1.255 1.72 -0.815 1.358UNION 0.099 0.023 0.115 0.307 0.135 0.056 0.14 0.495LOG(KL_KLEMS) -7.034 -4.136 -5.932 -5.582 -0.162 1.148 -4.015 9.579LOG(ICT_KLEMS) 1.436 3.596 1.775 -0.178 0.141 2.823 1.633 -2.729UNEMPL -0.322 -0.344 -0.249 -0.826obs 470 470 87 460 470 470 87 460adj r2 0.94 0.417 0.909 NA 0.944 0.449 0.916 NAdw 1.814 1.817 1.976 NA 1.884 1.784 2.048 NA

Table 8. Results with financial reform variables

37

1 2 3 4 5 6 7 8GROWTH -11.94 -12.75 -12.16 -12.37 -12.03 -12.33 -12.21 -12.14LOG(FINGLOB) -3.66 -3.48 -3.58 -3.60 -3.60 -3.63 -3.59 -3.42OPEN -3.81 -5.03 -4.95 -5.03 -5.02 -5.01 -5.09 -5.03LOG(GDPPW) -0.66 -3.02 -3.07 -2.89 -2.77 -3.04 -2.87 -2.51CG 0.80 0.64 0.66 0.67 0.69 0.67 0.67 0.67AG -0.24 -0.28 -0.26 -0.26 -0.26 -0.25 -0.26 -0.28IND -0.16 -0.18 -0.17 -0.17 -0.17 -0.17 -0.17 -0.17FINREF_CC -0.66FINREF_IRC -0.21FINREF_EB -0.11FINREF_PRIV -0.30FINREF_ICF 0.08FINREF_SM -0.41FINREF_XN -3.10obs 1450 1177 1177 1177 1177 1177 1177 1177adj r2 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98dw 1.72 1.66 1.66 1.66 1.66 1.66 1.66 1.65

Table 9. Results with labour market institutions variables

38

1 2 3 4 5 6 7 8GROWTH -11.94 -13.28 -12.30 -12.55 -12.34 -12.30 -12.79 -11.88LOG(FINGLOB) -3.66 -3.14 -2.75 -2.82 -2.69 -2.71 -3.15 -3.42OPEN -3.81 -3.16 -4.68 -3.84 -4.78 -4.80 -3.68 -3.78LOG(GDPPW) -0.66 -2.56 -1.52 -2.09 -2.02 -1.99 1.20 -0.25CG 0.80 0.62 0.62 0.43 0.56 0.57 0.77 0.80AG -0.24 -0.35 -0.29 -0.33 -0.29 -0.28 -0.25 -0.26IND -0.16 -0.10 -0.22 -0.18 -0.22 -0.22 -0.19 -0.17MW_MNW -0.48UB_GRR1 -2.51UB_COVERAGE 0.51EPL_AN4Y -1.22EPL_SP4Y 0.08LOG(LF) 5.00LOG(POP) -9.75obs 1450 718 1007 878 1026 1026 1242 1450adj r2 0.98 0.97 0.98 0.98 0.98 0.98 0.98 0.98dw 1.72 1.66 1.72 1.69 1.70 1.71 1.74 1.72

Other variations

• IMF LMI dataset (minW, UB, EPL)• Nothing

• IMF financial reform (8 variables)• Globalisation

• X have neg, M have pos effect• FDI: no effect• Priv credit, interest rate: some pos effect

39

Contributions to changes in the wage share, ALL countries, 1990/94-2000/04

40

Fin glob tech wfst

-2

-1.5

-1

-0.5

0

0.5

1

Contributions to change in the wage share 1990/94 to 2000/04

Contributions by estimation method

41

Fin glob tech wfst

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

Contributions to the change in the wage share in different specifica-tions 1990/94 to 2000/04

FEdiff5yrGMM

Contributions to the change in the wage share, developing economies, 1990/94-2000/04

42

fin glob tech wf.st

-1.5

-1

-0.5

0

0.5

1

1.5

Series1

Baseline specification (ADV)

• Baseline equation (advanced ADV countries):

WS = f(∆y, FINGLOB, TOT, OPEN, govt, UNION, K/L, ICT)

• Variables for• Globalisation: OPEN, TOT• Financialisation: FINGLOB• Technological + structural change: Y/L, ICT• Welfare state retrenchment: gov’t, UNION

43

Baseline specification (ADV)

44

coeff t-value

GROWTH -16.43 -5.22***

LOG(FINGLOB) -2.42 -3.37***

OPEN -5.89 -3.21***

TOT -4.55 -2.57**

CG 0.93 3.84***

UNION 0.10 1.78*

LOG(KL_KLEMS) -7.03 -1.82*

LOG(ICT_KLEMS) 1.44 1.64

obs 470

adj r2 0.94

dw 1.81

45

fin glob tech wfst

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

Contributions to the change in the wage share, advanced countries 1980/84-2000/04

Conclusion

46

Conclusion

• Main causes of changes in income distribution• financial globalization and welfare state retrenchment as main

causes for decline in wage share

• Developing economies: similar to ADVs• Globalisation and financial globalisation have negative effects

on WS – opposite to what Stolper & Samuelson predict• Positive effect of technological change• Unemployment has weaker effects

• Advanced economies (ADVs)• financial globalization and welfare state retrenchment as main

causes for decline in wage share• Moderate negative effects of technological change

47

Policy conclusions

• Part of project on ‘potentials of wage-led growth’• Neoliberalism has given rise to debt-led or export-led

growth regimes (Lavoie and Stockhammer 2012; Hein 2012). • Both rely on wage suppression• Both are economically unstable and socially unbalanced

• Explore macroeconomic potential of wage-led growth• Positive effects on demand (Onaran and Galanis 2012)• Positive effects on productivity (Storm and Naastepad 2012)

• To increase wage share: tackle financialisation and strengthen the welfare state (role of unions)

48

Appendix. Results ALL, DP

49

Table 4. Results by income group

50

1 2 3 4 5lowin lowmidin upmidin highin highinoecd

GROWTH -20.47 -26.62 -13.34 -10.01 -9.56LOG(FINGLOB) -2.40 -5.05 -2.46 -1.70 -1.77OPEN 12.83 -11.46 -7.56 -2.22 -2.54LOG(GDPPW) -7.46 23.67 8.28 -2.95 -3.69CG -0.99 0.85 0.69 0.67 0.80AG -0.55 -0.07 -0.33 -0.35 -0.32IND -0.12 0.62 -0.21 -0.46 -0.41obs 50 101 426 855 836adj r2 0.99 0.99 0.97 0.97 0.95dw 1.86 2.04 1.72 1.60 1.58

Table 5. Results by estimation method

51

1 2 3 4FE diff 5yr GMM

lag.dep.var. 0.57GROWTH -11.94 -12.15 -32.41 -30.51LOG(FINGLOB) -3.66 -2.65 -2.98 -3.79OPEN -3.81 -4.45 -5.80 2.92LOG(GDPPW) -0.66 4.95 -2.53 1.77CG 0.80 0.74 -0.04 -0.43AG -0.24 -0.28 0.01 -0.01IND -0.16 -0.20 -0.04 0.14obs 1450 1450 281 1352adj r2 0.98 0.17 0.97 NAdw 1.72 1.74 2.33 NA

Table 6. Results with different wage share variables (all countries)

52

1 2 3 4wsap wsa ws_un ws_unido

GROWTH -11.936 -0.107 -0.044 -0.140LOG(FINGLOB) -3.659 -0.033 -0.027 -0.029OPEN -3.811 -0.036 -0.019 -0.130LOG(GDPPW) -0.658 0.000 -0.001 -0.045CG 0.801 0.013 0.004 0.003AG -0.235 -0.002 -0.002 -0.001IND -0.159 -0.002 -0.003 -0.002obs 1450 1450 2089 670adj r2 0.981 0.981 0.958 0.943dw 1.719 1.734 1.857 1.894

Table 7. Results with different wage share variables (developing countries)

53

1 2 3 4wsap wsa ws_un ws_unido

GROWTH -13.846 -0.126 -0.052 -0.157

LOG(FINGLOB) -4.697 -0.043 -0.029 -0.051

OPEN -4.067 -0.040 -0.009 -0.087

LOG(GDPPW) 0.526 0.010 0.025 -0.032

CG 0.789 0.013 0.003 -0.008

AG -0.209 -0.002 -0.002 0.001

IND -0.028 0.000 -0.003 -0.002

obs 595 595 1151 186

adj r2 0.981 0.981 0.934 0.940dw 1.775 1.795 2.111 1.999

Table 8. Results with financial reform variables

54

1 2 3 4 5 6 7 8GROWTH -11.94 -12.75 -12.16 -12.37 -12.03 -12.33 -12.21 -12.14LOG(FINGLOB) -3.66 -3.48 -3.58 -3.60 -3.60 -3.63 -3.59 -3.42OPEN -3.81 -5.03 -4.95 -5.03 -5.02 -5.01 -5.09 -5.03LOG(GDPPW) -0.66 -3.02 -3.07 -2.89 -2.77 -3.04 -2.87 -2.51CG 0.80 0.64 0.66 0.67 0.69 0.67 0.67 0.67AG -0.24 -0.28 -0.26 -0.26 -0.26 -0.25 -0.26 -0.28IND -0.16 -0.18 -0.17 -0.17 -0.17 -0.17 -0.17 -0.17FINREF_CC -0.66FINREF_IRC -0.21FINREF_EB -0.11FINREF_PRIV -0.30FINREF_ICF 0.08FINREF_SM -0.41FINREF_XN -3.10obs 1450 1177 1177 1177 1177 1177 1177 1177adj r2 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98dw 1.72 1.66 1.66 1.66 1.66 1.66 1.66 1.65

Table 9. Results with labour market institutions variables

55

1 2 3 4 5 6 7 8GROWTH -11.94 -13.28 -12.30 -12.55 -12.34 -12.30 -12.79 -11.88LOG(FINGLOB) -3.66 -3.14 -2.75 -2.82 -2.69 -2.71 -3.15 -3.42OPEN -3.81 -3.16 -4.68 -3.84 -4.78 -4.80 -3.68 -3.78LOG(GDPPW) -0.66 -2.56 -1.52 -2.09 -2.02 -1.99 1.20 -0.25CG 0.80 0.62 0.62 0.43 0.56 0.57 0.77 0.80AG -0.24 -0.35 -0.29 -0.33 -0.29 -0.28 -0.25 -0.26IND -0.16 -0.10 -0.22 -0.18 -0.22 -0.22 -0.19 -0.17MW_MNW -0.48UB_GRR1 -2.51UB_COVERAGE 0.51EPL_AN4Y -1.22EPL_SP4Y 0.08LOG(LF) 5.00LOG(POP) -9.75obs 1450 718 1007 878 1026 1026 1242 1450adj r2 0.98 0.97 0.98 0.98 0.98 0.98 0.98 0.98dw 1.72 1.66 1.72 1.69 1.70 1.71 1.74 1.72

Appendix. Results ADV

56

Table 10. Baseline specification and different estimation methods – adv countries

57

1 2 3 4 5 6 7 8FE diff 5yr GMM FE diff 5yr GMM

lag.dep.var 0.48 0.29GROWTH -16.43 -11.04 -75.85 -25.23 -16.27 -12.15 -70.86 -11.84LOG(FINGLOB) -2.42 -1.29 -6.20 -1.19 -2.14 -0.91 -6.20 -2.45OPEN -5.89 -8.10 4.32 3.50 -6.57 -7.78 1.99 -8.48TOT -4.55 -3.26 1.39 -3.60 -4.66 -3.03 -0.05 -9.81CG 0.93 1.48 -1.03 0.56 1.26 1.72 -0.82 1.36UNION 0.10 0.02 0.12 0.31 0.14 0.06 0.14 0.50LOG(KL_KLEMS) -7.03 -4.14 -5.93 -5.58 -0.16 1.15 -4.02 9.58LOG(ICT_KLEMS) 1.44 3.60 1.78 -0.18 0.14 2.82 1.63 -2.73UNEMPL -0.32 -0.34 -0.25 -0.83obs 470 470 87 460 470 470 87 460adj r2 0.94 0.42 0.91 NA 0.94 0.45 0.92 NAdw 1.81 1.82 1.98 NA 1.88 1.78 2.05 NA

Table 11. Labour market institutions var. (Aleksynska & Schindler dataset), adv. countries

58

1 2 3 4 5 6 7GROWTH -16.43 -14.87 -21.71 -21.25 -21.68 -21.80 -13.90LOG(FINGLOB) -2.42 -3.49 -2.34 -2.41 -2.32 -2.33 -3.69OPEN -5.89 -5.59 -7.55 -7.51 -7.57 -7.55 -4.93TOT -4.55 -9.06 -8.69 -8.00 -8.76 -8.75 -7.87CG 0.93 0.81 0.78 0.75 0.78 0.79 0.85UNION 0.10 0.27 0.06 0.07 0.06 0.06 0.28LOG(KL_KLEMS) -7.03 -13.12 -12.98 -13.47 -12.93 -13.16 -12.50LOG(ICT_KLEMS) 1.44 5.73 4.96 5.07 4.96 5.00 5.87MW_MNW 0.09 -0.15UB_GRR1 0.79 0.70UB_COVERAGE -0.51 -0.75EPL_AN4Y 0.19 0.23EPL_SP4Y 0.22 0.53obs 470 222 347 325 347 347 213adj r2 0.94 0.95 0.95 0.95 0.95 0.95 0.95dw 1.81 1.88 1.85 1.81 1.85 1.84 1.85

Table 12. Labour market institutions var. (Bassanini & Duval dataset), adv. countries

59

1 2 3 4 5 6 7GROWTH -16.43 -21.53 -22.02 -21.78 -21.79 -21.29 -20.99LOG(FINGLOB) -2.42 -2.43 -2.46 -2.47 -2.39 -2.47 -2.51OPEN -5.89 -6.82 -6.92 -6.91 -6.98 -6.93 -6.59TOT -4.55 -7.59 -7.67 -7.50 -7.51 -7.57 -7.65CG 0.93 0.96 0.93 0.94 0.93 0.96 0.98UNION 0.10 0.02 0.02 0.01 0.02 0.02 0.02LOG(KL_KLEMS) -7.03 -14.98 -14.75 -14.95 -14.60 -15.36 -14.39LOG(ICT_KLEMS) 1.44 5.27 5.02 5.08 5.26 5.12 5.33EPL_BD 0.51 0.55BENDUR_BD -0.74 -0.57GRR_BD 0.02 0.02PMR_BD 0.19 0.13TW_BD -0.04 -0.04obs 470 319 319 319 319 319 319adj r2 0.94 0.95 0.95 0.95 0.95 0.95 0.95dw 1.81 1.69 1.69 1.69 1.68 1.70 1.70

Table 13. Results with financial reform variables, advanced countries

60

1 2 3 4 5 6 7 8 9GROWTH -16.43 -15.89 -16.17 -16.08 -16.06 -16.30 -16.09 -16.28 -16.16LOG(FINGLOB) -2.42 -2.62 -2.68 -2.61 -2.61 -2.65 -2.66 -2.61 -2.80OPEN -5.89 -5.82 -5.89 -5.79 -5.80 -5.79 -5.94 -5.85 -6.07TOT -4.55 -5.07 -5.29 -5.02 -5.02 -4.89 -5.01 -4.94 -5.30CG 0.93 1.03 1.02 1.03 1.03 1.00 1.01 1.01 0.98UNION 0.10 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.09LOG(KL_KLEMS) -7.03 -8.64 -8.22 -8.60 -8.50 -8.53 -8.54 -7.96 -8.74LOG(ICT_KLEMS) 1.44 2.16 2.21 2.16 2.15 2.19 2.25 2.22 2.36FINREF_CC 0.11 0.06FINREF_IRC -0.32 -0.40FINREF_EB 0.03 -0.04FINREF_PRIV 0.02 -0.10FINREF_ICF -0.26 -0.30FINREF_SM -0.32 -0.42FINREF_XN -1.76 1.79Obs 470 438 438 438 438 438 438 438 438adj r2 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94Dw 1.81 1.76 1.77 1.77 1.77 1.77 1.78 1.77 1.77

Table 14. Results with technological change variables, advanced countries

61

1 2 3 4 5 6GROWTH -15.71 -15.79 -16.43 -16.72 -17.04 -13.06LOG(FINGLOB) -2.49 -2.62 -2.42 -2.36 -2.41 -2.42OPEN -5.57 -5.67 -5.89 -6.07 -6.53 -5.45TOT -4.56 -4.69 -4.55 -4.55 -4.49 -4.74CG 0.97 0.98 0.93 0.93 1.09 0.63UNION 0.09 0.10 0.10 0.10 0.13 0.08LOG(ICT_KLEMS) 0.26 0.41 1.44 1.47 1.81 0.72LOG(ICT_KLEMS)^2 0.16LOG(KL_KLEMS) -7.03LOG(KL_HOURS_KLEMS) -6.82LOG(KL_AMECO) -18.71LOG(GDPPW) -8.85obs 470 470 470 470 450 470adj r2 0.94 0.94 0.94 0.94 0.94 0.94dw 1.83 1.84 1.81 1.81 1.79 1.73

Table 15. Results with globalisation variables, advanced countries

62

1 2 3 4 5 6 7GROWTH -16.43 -18.39 -16.51 -16.44 -16.71 -16.44 -16.44LOG(FINGLOB) -2.42 -2.08 -2.30 -2.45 -1.83 -2.41 -2.42OPEN -5.89 12.97 -5.61 -5.94 -4.41 -5.88 -5.89TOT -4.55 -2.94 -4.45 -4.55 -4.41 -4.55 -4.55CG 0.93 0.89 0.94 0.93 0.85 0.93 0.93UNION 0.10 0.11 0.10 0.10 0.10 0.10 0.10LOG(KL_KLEMS) -7.03 -6.50 -6.50 -7.14 -6.34 -6.99 -7.06LOG(ICT_KLEMS) 1.44 1.29 1.39 1.43 1.68 1.44 1.44OPEN_x -37.64FDI_in -1.05FDI_out 0.27KOF_glob_ec -0.12KOF_glob_soc -0.003KOF_glob_pol 0.001obs 470 470 470 470 470 470 470adj r2 0.94 0.94 0.94 0.94 0.94 0.94 0.94dw 1.81 1.82 1.81 1.82 1.80 1.81 1.81

63

fin glob tech wfst

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

Contributions to the change in the wage share, advanced countries 1980/84-2000/04

FEdiff5yrGMM