Labour and Financial Crises: Is Labour Paying the Price of the Crisis?

Abstract

International audienceThis paper investigates the relationship between the labour share and financial crises. While Diwan (2001) or Maarek et al. (2013) focused on the currency crisis, we propose to see if their analyses can be extended to the banking crisis and how it can influence the relative bargaining power of labour and capital within firms. To this end, we use international panel data of the share of labour in GDP. We confirm the existence of a negative trend for the labour share, which is largely explained by financial crises. However, the results differ for currency and banking crises. Currency crises affect the labour share negatively, while banking crises primarily affect capital income, at least during the year of the crisis. In the three years following a currency crisis, the labour share tends to be reduced by around 2% per year on average

The Circular Relationship Between Inequality, Leverage, and Financial Crises

“…On average, they find that currency crises reduce the labour share by 2 percentage points, and this effect comes mainly from within manufacturing sectors changes. This last result is consistent with Bazillier and Najman () who use a panel of developing and developed countries and aggregate data. This paper extends the analysis to banking crises and finds very different results.…”

The bad, the good and the ugly

“…19). En analyse av et større antall systemiske bankkriser (Bazillier & Najman, 2017) viser også at lønningenes andel av verdiskapningen gjennomsnittlig faller med 2 prosent i løpet av tre år etter bankkriser.…”

Development and the Labor Share

“…5 The labor share is defined as the ratio of wages and salaries over value added. 6 As argued by Gollin [18] this definition implies that all the income of the self-employed is treated as capital income which underestimates the labor share. This is particularly problematic in our study because it could bias the impact of development.…”

“…This paper relates to different strands of literature. First, it belongs to the growing literature on the labor share, as emphasized by the contributions of Bentolila and Saint Paul [7], Blanchard and Giavazzi [8], Acemoglu and Guerrieri [2], Maarek and Orgiazzi [28], Bazillier and Najman [6], Decreuse and Maarek [13], Rodrik [37] or Karabarbounis and Neiman [23] or Piketty [31]. None of these papers focus on the role of the economic development in developing countries.…”

“…The UNIDO data mainly comes from industrial surveys which are sent by UNIDO to the country statistical offices.The version of the UNIDO data that we use is INDSTAT 2005 ISIC Rev.25 The subsectors in the UNIDO data are: Food products; Beverage; Tobacco; Textile; Wearing apparel, except footwear; Leather products; Footwear, except rubber or plastic; Wood Products; Furniture, except metal; Paper and products; Printing and publishing; Industrial chemicals; Other chemical; Petroleum refineries; Misc. petroleum and coal products; Rubber products; Plastic products; Pottery, china, earthenware; Glass and products; Other non-metallic mineral products; Iron and steel; Non ferrous metal; Fabricated metal products; Machinery, except electrical; Machinery, electric; Transport equipment; Professional and scientific equipment; Other manufactured products 6. See Appendix for a more precise definition of these variables 7.…”