THE IMPACT OF LABOR SHARE ON ECONOMIC GROWTH: A PANEL DATA ANALYSIS FOR EUROPEAN UNION

A panel data analysis was conducted for EU countries spanning from 1995 to 2019 to gain insights into the impact of labor share on economic growth. The primary objective was to ascertain whether labor share remains less influential than capital share on economic growth, or if the changing landscape over the years necessitates a policy adjustment for optimizing economic growth. Notably, wage share exhibits a positive influence economic growth when it experiences positive growth and when is higher than growth of total factor productivity. These results challenge conventional wisdom and suggest that economic policies may need to adapt to the evolving dynamics of labor share and its impact on growth.