Labor income share and imperfectly competitive product market
- Authors
- Shim, Hyein; Chung, Chune Young; Ryu, Doojin
- Issue Date
- Jan-2018
- Publisher
- WALTER DE GRUYTER GMBH
- Keywords
- imperfect competition; income distribution; labor income share; market concentration
- Citation
- B E JOURNAL OF MACROECONOMICS, v.18, no.1
- Journal Title
- B E JOURNAL OF MACROECONOMICS
- Volume
- 18
- Number
- 1
- URI
- https://scholarworks.bwise.kr/cau/handle/2019.sw.cau/1367
- DOI
- 10.1515/bejm-2016-0188
- ISSN
- 1935-1690
- Abstract
- This study examines the long-run determinants of the income distribution between capital and labor in the Korean market, a leading emerging market. We develop a model of a special type of oligopolistic market, controlled by a group of dominant firms, and a general oligopolistic market, with heterogeneously sized firms. This model provides empirically testable implications related to the long-run determinants of the income distribution. Using two measures of the degree of market concentration, the k-firm concentration ratio (CRk) and the Hirschman-Herfindahl index (HHI), we find a negative association between these concentration measures (CRk and HHI) and the labor income share. In addition, analyzing a unique dataset of manufacturing firms based on five-and three-digit Korean Standard Industry Classifications from 2000 to 2011, we find a significantly negative relationship between the labor income share and the market concentration, which is consistent with the implications of the model. Overall, our results suggest that building a more competitive product market environment could alleviate national income inequality.
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