Production networks, input specificity, and the labor share
Description
Bargaining power is a key determinant of workers' share of aggregate income, yet difficult to measure empirically. This study proposes input specificity as an important determinant of bargaining power, arguing that the production of harder-to-substitute intermediates strengthens workers’ bargaining position. We develop a network-based measure of input specificity and apply it to regional input–output data for European economies. Our results suggest that input specificity varies systematically across regions and is positively associated with the labor share. We find evidence that the relationship between input specificity and the labor share is stronger under coordinated wage bargaining, indicating that institutional settings condition how structural positions in production networks translate into income for workers. From a policy perspective, upgrading strategies that increase input specificity may support higher labor shares, particularly in contexts where institutions enable workers to capture the associated rents.
Files
Steps to reproduce
## Installation An installed version of R and Quarto is required. The code was written in R Version 4.4.2. Download all data from https://doi.org/10.5281/zenodo.14134659, extract all files, and create an RStudio project in that folder. To ensure the reproducibility of the R packages used in this project, a [`renv`](https://rstudio.github.io/renv/index.html) lock file was created, containing information about the version of each package used. The lock file can be retrieved with `renv::restore()`. ## Usage The project folders are organized as follows: The `/r/` folder contains all scripts to reproduce the data-cleaning, pre-processing the original data and visualisation of the results. The necessary data can be found in the folder `/data/`, including the original and the processed data. The names of the different scripts represent the order in which they need to be run. All scripts starting with "1" transform the original EU Regio dataset. All scripts starting with "2" handle already processed data or download the original within calls in the script. All scripts starting with "3" process data and prepare it for the final analysis. All scripts starting with "4" are used for plotting, but also include data processing steps. The empirical analysis is done in the interactive script and is provided in the quarto document `5_regression_analysis.qmd`. ## Data The original data was retrieved from the Joint Research Center (JRC) of the European Commission. It can be retrieved from this link: http://data.europa.eu/89h/84356c3b-104d-4860-8ce3-075d2eab37ab and is saved in the folder `/data/original_data/eu_regio/` as XLSX files for every year (2000 until 2010). The original data is provided in the XLSB file format and the file type was changed to XLSX using Microsoft Excel to use the data in R. Data on union density comes from another original data source. It was retrieved from the [OECD/AIAS ICTWSS database](https://www.oecd.org/en/data/datasets/oecdaias-ictwss-database.html) and can be found in `/data/original_data/UD/` All processed data can be retrieved from the folder `data/processed_data/`. ## Results The results found in the manuscript can be received through running different scripts. All plots found in the manuscripts can be reproduced in the R-scripts whose names start with "4". The empirical analysis is done in the interactive script and is provided in the quarto document `5_regression_analysis.qmd`. A rendered version of the latter is provided in the HTML file `5_regression_analysis.html`. ## License CC-BY 4.0 ## Authors Anonymous ## References ### Data European Commission, Joint Research Centre (JRC) (2020): Regional Input-Output Data for Europe. European Commission, Joint Research Centre (JRC) [Dataset] PID: [http://data.europa.eu/89h/84356c3b-104d-4860-8ce3-075d2eab37ab](http://data.europa.eu/89h/84356c3b-104d-4860-8ce3-075d2eab37ab) EN: © EuroGeographics for the administrative boundaries