Privatization and the Decline of Labour's Share: International Evidence from Network Industries

23 Pages Posted: 22 Jun 2012

See all articles by Ghazala Azmat

Ghazala Azmat

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Alan Manning

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Date Written: July 2012

Abstract

Some authors have suggested that deregulation of product and labour markets is responsible for the decline in Labour's share of GDP. A simple model predicts that privatization is associated with a lower labour share, due to job shedding. We test this hypothesis by focusing on privatization of network industries in the OECD. We find that, on average, privatization accounts for a fifth of the fall of Labour's share, and over half in Britain and France. This is due to lower employment, but it is partially offset by higher wages and falling barriers to entry, which dampen profit margins.

Suggested Citation

Azmat, Ghazala and Manning, Alan and Van Reenen, John Michael, Privatization and the Decline of Labour's Share: International Evidence from Network Industries (July 2012). Economica, Vol. 79, Issue 315, pp. 470-492, 2012. Available at SSRN: https://ssrn.com/abstract=2089214 or http://dx.doi.org/10.1111/j.1468-0335.2011.00906.x

Ghazala Azmat

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
935421757 (Phone)
935421746 (Fax)

Alan Manning

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
(44 20) 7955 6078 (Phone)

John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom
+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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