DISCUSSING THE POTENTIAL DETERMINANTS OF DECLINING LABOR’S SHARE: A DESCRIPTIVE RESEARCH FOR OECD AND NON-OECD COUNTRIES

Numerous studies have empirically analyzed the reasons for the declining labor share of income, but only a few have found a common explanation in case of an aggregate economic structure. In this study, a major channel through which potential determinants may affect labor share of income is descriptively examined: the distribution/allocation channel. In this regard, the main feature of this study is to focus primarily on openness measures of trade regime and the financial sector. In addition, the institutional side of finance is included in the study in terms of financial development index comprising of both markets and institutions dataset of finance. While these indicators constitute the major body of the study, the other variables are added into the descriptive analysis. Moreover, some of these stylized facts are integrated into the basic framework as they, more or less, affect each sample country over time, especially under the use of liberalization policies imposed by recognized institutions such as IMF, World Bank, and Bank for International Settlements. This article suggests that the distributional variances not only depend on partial effect of a single indicator but also on their interactions with each other. Therefore, the comprehensive analysis of income distribution should consider the interaction terms of some crucial determinants as well as the weakened bargaining power of workers which have started to exaggerate in the early 1980s