Capital's Grabbing Hand? A Cross-Country/Cross-Industry Analysis of the Decline of the Labour Share

Andrea P. Bassanini

53 citations0/0 files storedOECD social employment and migration working papers

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Economic Theory and Policy Labor market dynamics and wage inequality Economic Growth and Productivity

Abstract

We examine the determinants of the within-industry decline of the labour share, using industry-level annual data for 25 OECD countries, 20 business-sector industries and covering up to 28 years. We find that total factor productivity growth – which captures (albeit imprecisely) capital-augmenting or labour-replacing technical change – and capital deepening jointly account for as much as 80% of the within-industry contraction of the labour share. We also find that other important factors are privatisation of state-owned enterprises and the increase in international competition as well as off-shoring of intermediate stages of the production process. By contrast, we are unable to detect any effect from increases in domestic competition brought about by entry deregulation.

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References

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2018Capital Shares and Income Inequality: Evidence from the Long Run 2016Structural Transformation in the OECD 2014Capital’s grabbing hand? A cross-industry analysis of the decline of the labor share in OECD countries 2019OUP accepted manuscript 2014Labour's share in twentieth-century Sweden: a reinterpretation 2017Globalisation and the decline of the labour share: A microeconomic perspective

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