ESRI Working Paper

Determinants of the (non-Housing) Labour Income Share in the EU

ESRI working papers represent un-refereed work-in-progress by researchers who are solely responsible for the content and any views expressed therein. Any comments on these papers will be welcome and should be sent to the author(s) by email. Papers may be downloaded for personal use only.

December 23, 2020
Attachment Size
Download PDF 233.82 KB

The stability of the labour income share has been regarded as a key component of modern macroeconomic analysis. However, a number of recent studies have challenged this apparent stability, documenting a global decline of the labour share. This paper assesses the developments in the non-housing labour income share for the EU member-states during the 1995-2018 period. Our descriptive analysis shows that, for this sample, the labour share has remained relatively constant, exhibiting a slight increase toward the end of the sample period. Using recently developed panel time series estimators that can account for the heterogeneous impact of macroeconomic shocks, we empirically test the impact of capital deepening, the size of the government, globalization and financialization on the labour share. Our results indicate that both relative prices and government size appear to be significant determinants of the labour share, while globalization and financialization do not have a significant effect.

Research Area(s)

Publication Details



Place of Publication


Date of Publication

December 23, 2020

ESRI Series

ESRI Working Paper 693