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ICC Advance Access published online on April 21, 2008
Industrial and Corporate Change, doi:10.1093/icc/dtn006
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© The Author 2008. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved.

The micro-level dynamics of declining labour share: lessons from the Finnish great leap*

Tomi Kyyrä and Mika Maliranta

In contrast with the experiences of the United Kingdom and the United States, the distribution of labour and capital income has changed sharply in favour of capital in most Continental European and Nordic countries during the past two decades. We examine forces behind the evolution of the aggregate labour share by analysing the dynamics of labour shares within and between firms/plants in the Finnish business sector. Using a decomposition method applied in labour economics and productivity analysis, we show that much of the decline in the aggregate labour share stems from the reallocation of resources between firms and plants, while labour shares at the firm/plant level have remained relatively stable.


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