The Effect of Labor's Bargaining Power on Wealth Inequality in the UK,USA, And France

This paper analyses the determinants of wealth inequality, measured as the share of wealth owned by the top 1 percent wealthiest individuals. We find that labor's bargaining power is a significant and important determinant of top wealth shares. Using a semi-structural vector autoregression (SVAR) model for the period 1970–2019, we estimate that shocks to labor's bargaining power explain 32 percent, 8 percent and 32 percent of the variation around the long-term trend in wealth inequality in the UK, USA and France, respectively.