Unionization and Labor Share of Income Distribution: An Empirical Investigation of OECD Countries

Abstract

This paper investigates the effects of unionization of the labor force and capital openness on the labor share of the income distribution. This paper empirically studies the relationship between labor share and unionization for OECD countries by regressing labor share on unionization of the labor force and other controlling variables. We use the Generalized Least Squares estimation method in panel data for the period of 1999-2011.  Our controlling variables include political stability, economic growth, and capital share.  We employ different panel data techniques with different hypothesis testing for robustness.  Our regression results show that an increase in capital openness decreases labor share while an increase in unionization rate increases it. On the other hand, political stability has a positive effect on labor shares while economic growth seems to affect labor shares negatively. Also, an increase in capital share decreases the labor share but it is not statistically significant.