Arbeitspapier
Labour Share Fluctuations in Emerging Markets: The Role of the Cost of Borrowing
This paper contributes to the literature by documenting labour income share fluctuations in emerging-market economies and proposing an explanation for them. Time-series data indicate that emerging markets differ from developed markets in terms of changes in the labour share over the business cycle. Labour share is more volatile in emerging markets and is procyclical, especially in countries facing countercyclical interest rates. In contrast, labour share in developed markets is more stable and slightly countercyclical. A frictionless small open-economy real business cycle model cannot account for these facts. I introduce working capital into this model, which generates liquidity need for labour payments. The main result is that the behaviour of the cost of borrowing can predict the right sign of the co-movement between labour share and output in both country groups, and can partly be responsible for the volatility of labour share. I also show that imperfect financial markets in the form of credit restrictions not only amplify the results for the variability of labour share but also help better explain some of the striking business cycle regularities in emerging markets, such as highly volatile consumption, strongly procyclical investment and countercyclical net exports.
- Language
-
Englisch
- Bibliographic citation
-
Series: Bank of Canada Working Paper ; No. 2014-47
- Classification
-
Wirtschaft
Aggregate Factor Income Distribution
Open Economy Macroeconomics
Financial Markets and the Macroeconomy
- Subject
-
Business fluctuations and cycles
Labour markets
Development economics
International topics
Interest rates
- Event
-
Geistige Schöpfung
- (who)
-
Kabaca, Serdar
- Event
-
Veröffentlichung
- (who)
-
Bank of Canada
- (where)
-
Ottawa
- (when)
-
2014
- DOI
-
doi:10.34989/swp-2014-47
- Handle
- Last update
- 10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kabaca, Serdar
- Bank of Canada
Time of origin
- 2014
Other Objects (12)
Aggregate fluctuations and the role of trade credit
Domestic versus external borrowing and fiscal policy in emerging markets
To share or not to share? Uncovered losses in a derivatives clearinghouse
Inequality in parental transfers, borrowing constraints and optimal higher education subsidies
Labour shares and the role of capital and labour market imperfections
Financial factors and labour market fluctuations
Exchange rate fluctuations, plant turnover and productivity
Technology shocks, labour mobility and aggregate fluctuations
Sources of borrowing and fiscal multipliers
Unemployment fluctuations in a small open-economy model with segmented labour markets: The case of Canada
Financial frictions, financial shocks and labour market fluctuations in Canada
Modeling fluctuations in the global demand for commodities
Aggregate fluctuations and the role of trade credit
Domestic versus external borrowing and fiscal policy in emerging markets
To share or not to share? Uncovered losses in a derivatives clearinghouse
Inequality in parental transfers, borrowing constraints and optimal higher education subsidies
Labour shares and the role of capital and labour market imperfections
Financial factors and labour market fluctuations
Exchange rate fluctuations, plant turnover and productivity
Technology shocks, labour mobility and aggregate fluctuations
Sources of borrowing and fiscal multipliers
Unemployment fluctuations in a small open-economy model with segmented labour markets: The case of Canada
Financial frictions, financial shocks and labour market fluctuations in Canada
Modeling fluctuations in the global demand for commodities
Aggregate fluctuations and the role of trade credit
Domestic versus external borrowing and fiscal policy in emerging markets
To share or not to share? Uncovered losses in a derivatives clearinghouse
Inequality in parental transfers, borrowing constraints and optimal higher education subsidies
Labour shares and the role of capital and labour market imperfections
Financial factors and labour market fluctuations
Exchange rate fluctuations, plant turnover and productivity
Technology shocks, labour mobility and aggregate fluctuations
Sources of borrowing and fiscal multipliers
Unemployment fluctuations in a small open-economy model with segmented labour markets: The case of Canada
Financial frictions, financial shocks and labour market fluctuations in Canada