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I am grateful to Jörg Decressin and Erik Lueth for helpful discussions; and to Anastasia Guscina for assistance in assembling the data on labor shares.
If a fall in the labor share caused a rise in inequality, the series should be negatively correlated. However, the correlation coefficient is 0.3 for our sample.
Gomme and Rupert (2004) discuss measurement issues with regard to the computation of the labor share in the United States and show that “historic lows” in the early 2000s are observed only in the nonfarm business sector while other measures of labor’s share—for example, for the nonfinancial corporate business sector or the macroeconomy more broadly—are currently near their averages over the last several decades.
The LIS project began in 1983 and the main objective has been to create a micro-database containing social and economic data collected in household surveys from different countries. The database currently contains information for some 25 advanced countries for one or more years. However, for most countries, data are currently available only up to 2000.
In his speech on “The level and distribution of well-being” on February 6, 2007, Federal Reserve Bank Chairman Bernanke mentions that the median hourly wage of full-time workers rose by about 11.5 percent between 1979 and 2006, indicating a strong pick-up of real wage growth in the United States in the 2000s.
Corresponding figures were not calculated for other countries in the sample, including France and Italy, that only report net income and wage data and which are also influenced by tax and transfer changes over time.
The OECD (2007) shows that, for an average of 10 OECD countries, much of the cumulative increase in earnings dispersion since 1990 has occurred in the top half of the earnings distribution. But it is likely that this finding is strongly driven by developments in the United States, the United Kingdom and Sweden which are all included in this group.
One could argue that these institutional changes were a response to globalization. However, Levy and Temin (2007) strongly dispute this and states that globalization clearly does not determine institutions.
Income inequality has also remained stable in Ireland from 1987 to 2000. Wage data are only available starting in 1994.