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The Labor Share in the Long Term: A Decline?

Author

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  • Gilbert Cette

    (Centre de recherche de la Banque de France - Banque de France, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Lorraine Koehl

    (INSEE)

  • Thomas Philippon

    (NYU - New York University [New York] - NYU - NYU System)

Abstract

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?," Post-Print hal-02446713, HAL.
    • Handle: RePEc:hal:journl:hal-02446713
    DOI: 10.24187/ecostat.2019.510t.1993
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02446713
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    More about this item

    Keywords

    labor share; labor cost; value added sharing;
    All these keywords.

    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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