Functional income distribution in European transition countries

Vecchi, Michela ORCID: https://orcid.org/0000-0002-0129-6769, Venturini, Francesco and Rincon, Ana (2015) Functional income distribution in European transition countries. In: Inequalities during and after transition in Central and Eastern Europe. Perugini, Cristiano and Pompei, Fabrizio, eds. Studies in Economic Transition . Palgrave Macmillan UK, pp. 59-92. ISBN 9781137460974. [Book Section] (doi:10.1057/9781137460981_4)

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Abstract

This paper studies the drivers of labour share dynamics in transition economies in Europe. We perform a long-run country-level regression analysis for the period 1990-2010, finding that capital-labour substitution and technological change were the main drivers of the decline in the labour share but no role can be ascribed to changes in the regulatory setting of the product and factor markets. However, by focusing on a relatively more recent period of time and by exploiting cross-sectoral data variation, we find that the decline in the labour share was mainly due to the deregulation of the labour market, whereas an easier firm’s access to the market and, more generally, larger business freedom had an opposite effect, i.e. they increased the value added share accruing to workers

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