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Privatization, entry regulation and the decline of labor's share of GDP: a cross-country analysis of the network industries

Azmat, Ghazala and Manning, Alan and Van Reenen, John (2007) Privatization, entry regulation and the decline of labor's share of GDP: a cross-country analysis of the network industries. 806. Centre for Economic Performance , London School of Economics and Political Science, London, UK.

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Identification Number: 806

Abstract

Labor’s share of GDP in most OECD countries has declined over the last two decades. Some authors have suggested that these changes are linked to deregulation of product and labor markets. To examine this we focus on a large quasi-experiment in the OECD: the privatization of many network industries (e.g. telecommunications and utilities). We present a model with agency problems, imperfect product market competition and worker bargaining which makes clear predictions on how the labor share, employment and wages respond to privatization and other regulatory changes. We exploit cross-country panel data on several network industries and find that privatization can account for a significant proportion of the fall of labor’s share (a fifth overall, but over half in Britain and France). The impact of privatization has been offset by falling barriers to entry, which consistent with theory, dampens profit margins.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 2007 G. Azmat, A. Manning and J. Van Reenen
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E25 - Aggregate Factor Income Distribution
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment (including Inventories); Capacity
L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L32 - Public Enterprises
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General
L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L33 - Comparison of Public and Private Enterprises; Privatization; Contracting Out
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Date Deposited: 30 Apr 2008 14:54
Last Modified: 01 Oct 2010 08:52
URI: http://eprints.lse.ac.uk/id/eprint/4552

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