1. The distributional effects of labour market deregulation: Wage share and fixed-term contracts.
- Author
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Amendola, Marco, Ciampa, Valerio, and Germani, Lorenzo
- Subjects
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LABOR market , *INCOME distribution , *DEREGULATION , *CONTRACTS ,DEVELOPED countries - Abstract
Since the 1980s, most advanced economies have massively 'flexibilized' their labour markets by reducing the protection against layoffs and introducing temporary and flexible contracts. Concurrently, a well-established economic stylized fact – the stability of the wage share of income – has been challenged as empirical evidence reveals a substantial decline in labour share across numerous countries. In this study, we aim to empirically investigate the causal link between these two phenomena by examining the impact of changes in the regulation of fixed-term contracts, as measured by variation over time in the temporary contracts EPL index, on the functional distribution of income. We employ Jordà's local projection method for a panel of 18 advanced countries over the period 1985–2019 and show that reforms that deregulate fixed-term contracts consistently reduce the wage share. • The wage share has declined in many countries in recent decades. • The study investigates the impact of fixed-term contract protection reforms on functional income distribution. • Local projections are applied to EPL variations for a sample of 18 advanced economies over the period 1985–2019. • A nonlinear analysis is conducted to explore the effects of flexibilization and tightening reforms. • The results indicate that deregulating fixed-term contracts leads to a significant reduction in the wage share. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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