Sectoral Patterns of Distribution in Slowly Growing Economies: The case of nine OECD countries in the 1980s and 1990s

Abstract

Slow productivity growth has put pressure on the distribution of income between wages and profits in ways that are not amenable to a US versus Europe dichotomy but vary between sectors (especially between manufacturing and service activities) as well as among countries. Over the 1980s and the 1990s, wage flexibility and profit margin flexibility in service sectors-characterised, respectively, by high shares of total employment and high shares of total profits-outlined three growth patterns: countries adjusting to slow productivity growth by means of considerable flexibility in relative wages in services (as in the US, the UK and Germany); adjustment through flexibility in relative profit margins (as in France, Canada and Sweden); and finally, an absence of change in the sectoral structure of distribution (as in Japan, Italy and Belgium). These patterns may be associated with either changes in wage and profit rates or structural adjustments (such as changes in the share of part time jobs, or changes in the composition of the capital stock). They are shown to be an important influence on the prospect of a resumption of high productivity growth.