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The Global Upward Trend in the Profit Share

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Author Info

  • Luci Ellis
  • Kathryn Smith

Abstract

The profit share—the share of factor income going to capital—has trended upwards since about the mid 1980s in most developed economies. Not all of the possible explanations for this are consistent with the timing or the cross-country pattern of the data. Our preferred explanation is that technological progress has increased the rate of obsolescence of capital goods. This induces faster churn in both capital and jobs, which endogenously puts firms in a stronger bargaining position. The effect is larger where there is stronger labour and product market regulation.

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Bibliographic Info

Article provided by Duncker & Humblot, Berlin in its journal Applied Economics Quarterly.

Volume (Year): 56 (2010)
Issue (Month): 3 ()
Pages: 231-256

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Handle: RePEc:aeq:aeqaeq:v56_y2010_i2_q2_p231-256

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Web: http://www.duncker-humblot.de/index.php/zeitschriften/wirtschafts-undsozialwissenschaften/appliedeconomicsquarterly.html

Related research

Keywords: profit share; wage share; technological progress; regulation;

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References

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  1. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD Publishing.
  2. Cadiou, Loic & Dees, Stephane & Laffargue, Jean-Pierre, 2003. "A computational general equilibrium model with vintage capital," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11-12), pages 1961-1991, September.
  3. Benoit Dostie & Mathieu Trépanier, 2004. "Return to Computer Use and Organizational Practices of the firm," Cahiers de recherche 04-06, HEC Montréal, Institut d'économie appliquée.
  4. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  5. Lynn Elaine Browne & Rebecca Hellerstein, 1997. "Are we investing too little?," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 29-50.
  6. Van Reenen, John & Caroli, Eve, 2001. "Skill-Biased Organizational Change? Evidence from a panel of British and French establishments," Economics Papers from University Paris Dauphine 123456789/10093, Paris Dauphine University.
  7. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
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Citations

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Cited by:
  1. Luciano BOGGIO & Vincenzo DALL’AGLIO & Marco MAGNANI, 2010. "On Labour Shares in Recent Decades: A Survey," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 118(3), pages 283-333.
  2. Arvind Subramanian & Aaditya Mattoo, 2008. "Multilateralism Beyond Doha," Working Papers 153, Center for Global Development.
  3. Mariolis, Theodore & Tsoulfidis, Lefteris, 2010. "Measures of production price-labour value deviation and income distribution in actual economies: theory and empirical evidence," MPRA Paper 43718, University Library of Munich, Germany.
  4. Sekine, Toshitaka, 2009. "Another look at global disinflation," Journal of the Japanese and International Economies, Elsevier, vol. 23(2), pages 220-239, June.
  5. Peltonen, Tuomas A. & Skala, Martin & Santos Rivera, Alvaro & Pula, Gabor, 2008. "Imports and profitability in the euro area manufacturing sector: the role of emerging market economies," Working Paper Series 0918, European Central Bank.
  6. Timilsina, Govinda R. & Shrestha, Ashish, 2008. "The growth of transport cector CO2 emissions and underlying factors in Latin America and the Caribbean," Policy Research Working Paper Series 4734, The World Bank.
  7. Marika Karanassou & Hector Sala, 2011. "Inequality and Employment Sensitivities to the Falling Labour Share," Working Papers 680, Queen Mary, University of London, School of Economics and Finance.
  8. Thomas Goda, 2013. "Changes in income inequality from a global perspective: an overview," Working Papers PKWP1303, Post Keynesian Economics Study Group (PKSG).
  9. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2012. "Labour share and employment protection in European economies," MPRA Paper 43058, University Library of Munich, Germany.
  10. Mario Mansour & Michael Keen, 2009. "Revenue Mobilization in Sub-Saharan Africa: Challenges from Globalization," IMF Working Papers 09/157, International Monetary Fund.
  11. Brufman, Leandro & Martinez, Lisana & Artica, Rodrigo Perez, 2013. "What are the causes of the growing trend of excess savings of the corporate sector in developed countries ? an empirical analysis of three hypotheses," Policy Research Working Paper Series 6571, The World Bank.
  12. Guerriero, Marta & Sen, Kunal, 2012. "What Determines the Share of Labour in National Income? A Cross-Country Analysis," IZA Discussion Papers 6643, Institute for the Study of Labor (IZA).
  13. Mariolis, Theodore, 2010. "Κριτική Έκθεση του "Νόμου της Πτωτικής Τάσης του Ποσοστού Κέρδους" του K. Marx: Κατανομή Εισοδήματος, Επισώ�," MPRA Paper 22461, University Library of Munich, Germany.
  14. repec:pra:mprapa:43050 is not listed on IDEAS
  15. Pérez Artica, Rodrigo & Brufman, Leandro & Martinez, Lisana, 2013. "What are the causes of the growing trend of excess savings of the corporate sector in developed countries? An empirical analysis of three hypotheses," MPRA Paper 47410, University Library of Munich, Germany.

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