Economic Thought and Practice, , 2024.
Original scientific paper
MINIMUM WAGE AND MANUFACTURING LABOR SHARE: EVIDENCE FROM NORTH MACEDONIA
Marjan Petreski
orcid.org/0000-0002-2675-8325
; University American College Skopje, North Macedonia; Finance Think – Economic Research & Policy Institute, Skopje; Partnership for Economic Policies, Canada
Jaakko Pehkonen
; University of Jyväskylä, Finland
Abstract
The objective of the paper is to understand whether the minimum wage plays a role in the labor share in the manufacturing sector in North Macedonia. We decompose the movements of the labor share into those along a share-capital curve, shifts of this locus, and deviations from it. We use the capital-output ratio, total factor productivity and input prices to capture these factors, while the minimum wage is introduced as an element that shifts the curve. We estimate a panel of 20 manufacturing branches over the period 2012-2019 with FE, IV and system-GMM estimators. We find that the role of the minimum wage for the labor share is industry-specific. In labor-intensive and low-paid industries, it increases workers’ labor share, which corresponds to a complementarity between capital and labor. For capital-intensive branches, it reduces labor share, likely through the job loss channel and along a substitutability between labor and capital. This applies to both branches where foreign investment and heavy industry are integrated.
Keywords
labor share; capital endowment; minimum wage; North Macedonia
Hrčak ID:
313735
URI
Publication date:
26.1.2024.
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