Labor Market Rigidity, Social Policy and the Labor Share. Empirical evidence before and after the big crisis.

We estimate the impact of four important and general policies shaping the degree of labor market rigidity on the labor share: the intensity of employment protection, welfare expenditures, government expenditures on active labor market programs, and minimum wage policy. Moreover, we are interested in whether the size of trade unions affects the labor share. Labor income share has experienced a declining trend since mid-1970s, and the empirical evidence found little if no correlation of this decline to general labor market institutions. We found, however, that some institutions are correlated to the downward trend, depending on the welfare system adopted. Moreover, many countries saw an upsurge of their labor share after the burst of the financial crisis. We also discuss evidence of whether the crisis weakened or reinforced the effect of some policies in sustaining the labor share.