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Declining Labor Share and Innovation

Author

Listed:
  • Georges Vivien Houngbonon

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

  • Pascal da Costa

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

Abstract

In this paper, we document declining labor share using a sample of international companies from developed economies. While this trend makes internal funds available for financing innovation, we find that R&D expenditures fall alike. Firm-level fixed effects estimation , controlling for the intensity of competition and financial constraints, confirms a positive correlation between labor share and R&D expenditures. A counterfactual analysis shows that a percentage point fall in labor share reduces output growth by 0.01 percentage point in the short run, and up to 0.02 percentage point in the long run, due to declining innovation.

Suggested Citation

  • Georges Vivien Houngbonon & Pascal da Costa, 2018. "Declining Labor Share and Innovation," Post-Print hal-04331207, HAL.
    • Handle: RePEc:hal:journl:hal-04331207
    as

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    Keywords

    Innovation; Labor share;

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