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Capital Heterogeneity and the Decline of the Labour Share

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  • Mary O’Mahony
  • Michela Vecchi
  • Francesco Venturini

Abstract

We investigate the decline of the labour share in a world characterized by increasing heterogeneity of capital assets. Our results show that over the 1970–2007 period, the decline of the labour share has been driven mainly by Information and Communication Technology assets and is mitigated by increasing investments in R&D‐based knowledge assets. Extending to other forms of intangible capital from 1995 onwards, we find that intangible investments related to innovation increase the labour share while those related to the organization of firms contribute to its decline, particularly for low‐ and intermediate‐skilled workers. Our results are robust to an array of econometric issues, namely heterogeneity, cross‐sectional dependence and endogeneity.

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  • Mary O’Mahony & Michela Vecchi & Francesco Venturini, 2021. "Capital Heterogeneity and the Decline of the Labour Share," Economica, London School of Economics and Political Science, vol. 88(350), pages 271-296, April.
    • Handle: RePEc:bla:econom:v:88:y:2021:i:350:p:271-296
    DOI: 10.1111/ecca.12356
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