The Decline of the Labor Share: New Empirical Evidence

Drago Bergholt · Francesco Furlanetto · Nicolò Maffei‐Faccioli

83 citations0/0 files storedAmerican Economic Journal Macroeconomics

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

Abstract

We use time series techniques to estimate the importance of four main explanations for the decline of the US labor income share: rising firm markups, falling bargaining power of workers, higher investment-specific technology growth, and more automated production processes. Identification is achieved with restrictions derived from a stylized model of structural change. Our results point to automation as the main driver of the labor share, although rising markups have played an important role in the last 20 years. We also find evidence of capital-labor complementarity, suggesting that capital deepening may have raised the labor share. (JEL D21, D43, E25, J51, L23, O33, O41)

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References

2014Capital in the Twenty-First Century 2007Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach 2019Robots and Jobs: Evidence from US Labor Markets 2018The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment 2000Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply 2020The Fall of the Labor Share and the Rise of Superstar Firms*1988Production, growth and business cycles 2013The Global Decline of the Labor Share*

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