How human capital affects labor income share at the sectoral level?: Evidence from the EU-13 countries and the UK

Purpose The author investigates the effects of human capital on labor income share in the 15 sectors of the European Union (EU)-13 countries and the United Kingdom (UK) over the period 2008-2015. Design/methodology/approach The author employs pooled ordinary least squares (OLS) estimation with panel data, using the EU KLEMS database. Findings The results show that when education level increases, labor income share increases and gender-based labor income share differentials decrease. Return to education is higher in qualitative sectors in contrast with the other sectors. Moreover, there are gender-based labor income share differentials at the sectoral level. These differentials are higher in nonqualitative sectors, while they are relatively lower in qualitative sectors. Research limitations/implications The biggest limitation of the study is that the data range cannot be expanded because of the database. The author is of opinion that the empirical findings will guide to policy makers in terms of wage setting. Originality/value The expected contribution of this study to the literature is to investigate the effect of human capital on labor income share at the sectoral level for the EU-13 countries and the UK. As far as the author knows, there is no study which investigates this topic at the sectoral level such a comprehensive, in the literature.