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The Labor Share in the Long Term: A Decline?

Author

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  • Gilbert Cette
  • Lorraine Koehl
  • Thomas Philippon

Abstract

[eng] We challenge the accepted wisdom of a global secular decline in the labor share. A simple theoretical model is proposed to highlight the main factors of change in the labor share. We document three issues in the existing literature: (i) starting periods for the empirical analysis; (ii) accounting for self employment; and (iii) accounting for residential real estate income. An empirical analysis is carried out since the post war period for France and the United States, and since the 1990s for ten developed countries and on a six country “euro area”. How the three questions above are addressed is crucial to the diagnosis. When the biases that may arise with the three issues mentioned above are eliminated, the labor share in the market sector does not show a general downward or upward trend. The choice of period has a huge impact, as does the treatment of real estate services, whose inclusion or not in the value added can result in significantly different trends.

Suggested Citation

  • Gilbert Cette & Lorraine Koehl & Thomas Philippon, 2019. "The Labor Share in the Long Term: A Decline?," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 510-511-5, pages 35-51.
    • Handle: RePEc:nse:ecosta:ecostat_2019_510t_5
    DOI: https://doi.org/10.24187/ecostat.2019.510t.1993
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    References listed on IDEAS

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    1. Matthew Rognlie, 2015. "Deciphering the Fall and Rise in the Net Capital Share," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 1-69.
    2. Matthew Rognlie, 2015. "Deciphering the Fall and Rise in the Net Capital Share: Accumulation or Scarcity?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 1-69.
    3. Devesh R. Raval, 2019. "The micro elasticity of substitution and non‐neutral technology," RAND Journal of Economics, RAND Corporation, vol. 50(1), pages 147-167, March.
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    Cited by:

    1. Cyprien Batut & Ulysse Lojkine & Paolo Santini, 2022. "Recounting France’s trade unions," Institut des Politiques Publiques halshs-03693431, HAL.
    2. Cette, Gilbert & Koehl, Lorraine & Philippon, Thomas, 2020. "Labor share," Economics Letters, Elsevier, vol. 188(C).
    3. Federico Riccio & Lorenzo Cresti & Maria Enrica Virgillito, 2022. "The labour share along global value chains. Perspectives and evidence from sectoral interdependence," LEM Papers Series 2022/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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    More about this item

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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