Investigation of labour income share for European Union 15 countries and Turkey

Labor income share (LIS) has been in a downward trend in worldwide since 1980's and there is still no consensus on the reasons of this decline. There have been many studies on the causes of this decline. However, to our best knowledge, these studies have ignored spatial interactions for the countries with high integration. Also, the effects of macro dynamics on LIS were not taken into consideration for Turkey. Thus, the main aim of this study is to examine the impact of spatial interactions on LIS for the EU-15 countries at the regional level and investigate the macro-dynamics of LIS for Turkey. The results of the study show that LIS has decreased over time in EU-15 countries and Turkey. The effect of globalization and integration process on LIS is negative for EU-15 countries. Also, the spatial effect on LIS is negative for EU-15 countries and this negative effect has increased by the Single Market Program. The effect of total factor productivity, capital-output ratio and trade openness on LIS are negative in the EU-15 countries, Moreover, the effect of agricultural and industrial sector share on LIS is negative at the regional level in EU countries, while the effect of the service sector share is positive. In spite of the fact that the interaction between countries is negative in industry and service sector, it is positive in agricultural sector. The findings of the study for Turkey also show that the effect of economic growth and inflation on LIS is negative.