Labor share in transition economies: brief firm-level investigation

Abstract

ABSTRACT In this paper, we examine the role of the globalization factors for the labour share in transition economies. We rely on firm-level data from the Enterprise Surveys of the World Bank and EBRD. We base the analysis on the predictions of the classic trade and efficient bargaining models, which under globalization suggests that factors that work to increase or attenuate the bargaining power of workers, affect the share of income that goes in their hands. We find some role of globalization for labour share in transition economies. Labour productivity and the fixed cost of the capital to relocate contribute to increasing labour share, while the alternative returns of capital work in the opposite direction. Labour-related costs and alternative returns were found irrelevant. For transition economies, policies focused on labour productivity and on cooperation, instead of competition, in the policies to attract FDIs may improve the outcomes for workers and their incomes.