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The B.E. Journal of Macroeconomics

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Labor income share and imperfectly competitive product market

Hyein Shim
  • Fiscal Information Research Center, Korea Public Finance Information Service, Seoul, Republic of Korea
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Chune Young Chung / Doojin Ryu
Published Online: 2017-09-15 | DOI: https://doi.org/10.1515/bejm-2016-0188

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.

Keywords: imperfect competition; income distribution; labor income share; market concentration

JEL Classification: D33; E25

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About the article

Published Online: 2017-09-15


Citation Information: The B.E. Journal of Macroeconomics, Volume 18, Issue 1, 20160188, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2016-0188.

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