The determinants of income distribution: the role of progress in human capital

This study investigates the relationship between the degree of human capital and the labor’s share for selected 30 economies over the 1980–2019 period. The main rationale behind this nexus is to show that a higher degree of human capital reduces the labor’s share if the bargaining power of workers is relatively low than the threat option of capital. This also leads to exacerbation of inter-class conflicts and thus may result in a higher rate of income diversion among the wage and salaried workers. Along with the negative impact of the bargaining framework on labor’s share, the study also refers to the argument that technological progress can increase the labor’s share if it absorbs the excess supply of workers by tending to an increase in employment opportunities. However, the empirical findings also imply that technological progress alone has a downward trend on labor’s share since it may lead to provide an extra surplus for capital and thus raises the capital’s share at the expense of labor’s share.