Ugur, Mehmet ORCID: 0000-0003-3891-3641 (2024) Effects of innovation and markups on employment and labour share in OECD industries. Structural Change and Economic Dynamics, 71. pp. 221-234. ISSN 0954-349X (Print), 1873-6017 (Online) (doi:https://doi.org/10.1016/j.strueco.2024.07.011)

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Abstract

This paper takes issue with what I describe as a single focus on either innovation or market power as potential determinants of employment or labour share. Drawing on a constant elasticity of substitution (CES) production function and EU- KLEMS data on OECD industries, I demonstrate that the unifocal approach is not justified theoretically or empirically. I report that: (i) employment and labour share depends on both innovation and market power; (ii) market power’s direct effects on both outcomes are always negative and large; (iii) innovation’s direct effects are small and depend on the elasticity of substitution between capital and labour; and (iv) innovation and market power have substitute interactive effects that exacerbate the fall in employment or labour share. I conclude that the main driver of the decline in labour share and/or employment is not technological innovation as such but the level of rents that innovating firms are able to extract.

Item Type:	Article
Uncontrolled Keywords:	technological change, markups, labour share, elasticity of substitution
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) > Centre for Governance, Risk and Accountability (CGRA) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	20 Aug 2024 10:23
URI:	http://gala.gre.ac.uk/id/eprint/47698

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