Competition Policy and the Labour Share
Competition Policy and the Labour Share, upcoming in The Journal of Law, Economics, and Organization
36 Pages Posted: 17 Apr 2021 Last revised: 18 Apr 2023
Date Written: April 11, 2021
Recent years have seen intense debate about the causes of the observed decline in the labour share. We extend this inquiry by investigating whether the design and enforcement of competition law and policy are associated with changes in the labour share. Using a panel of 22 industries in 12 OECD economies we find a positive statistical association between the effectiveness of competition policy and changes in the labour share over the period 1995-2005. This suggests a potential link between the design and effectiveness of competition policy and the labour share, and more broadly to distributional outcomes. Our results reinforce the importance of accounting for country-specific factors, including the design and enforcement of local laws, when examining dynamics in the labour share. The analysis implies that effective competition law and policy could mitigate the decline of the labour share, particularly in settings characterised by low levels of labour protection and limited labour bargaining power.
Keywords: Competition policy, Economic inequality, Labour share, Market power
JEL Classification: C23, D2, J3, K21, L4
Suggested Citation: Suggested Citation