Monday, May 31, 2021

Competition Policy and the Decline of the Labour Share

Competition Policy and the Decline of the Labour Share

Amit Zac

University of Oxford

Carola Casti

University of Oxford

Christopher Decker

University of Oxford

Ariel Ezrachi

University of Oxford - Faculty of Law

Abstract

We investigate whether there is a link between competition policy and the decline in ‎the labour share observed in many industrialised countries. By using a panel of 22 ‎industries in 12 OECD economies, over the period 1995-2005, we find a positive link ‎between an effective competition policy and the labour share trend. Our findings ‎support the hypothesis that a lax or inactive competition policy has contributed to the ‎decline of the labour share across many developed countries. The main mechanism ‎through which competition policy affects the labour share is through its ability to ‎constrain mark-ups: competition policy is negatively correlated to mark-ups, while ‎mark-ups are negatively correlated to labour share. The results suggest that ‎competition policy could be particularly important in mitigating the decline of the ‎labour share in settings characterised by low levels of labour protection and labour ‎bargaining power. More broadly, by permitting higher mark-ups to be sustained in ‎some industries and jurisdictions, the results suggest that weak competition policy may ‎contribute to higher levels of economic inequality given that labour income is more ‎evenly distributed across households than capital income. ‎

https://lawprofessors.typepad.com/antitrustprof_blog/2021/05/competition-policy-and-the-decline-of-the-labour-share.html

| Permalink

Comments

Post a comment