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The Declining Labor Share of Income

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  • Francisco Rodriguez

    ()
    (Human Development Report Office of the United Nations Development Programme)

  • Arjun Jayadev

    ()
    (University of Massachusetts Boston)

Abstract

We use two distinct panel datasets to extract and examine data on the labor share of output. From the first, we examine trends in the economy-wide labor share and from the second, we examine trends in the labor share of the manufacturing sector over the last three decades. Both datasets show that labor shares have decreased, starting from about 1980, in most regions of the world. This finding is robust to adjustments for self-employment as well as adjustments for unbalanced panel structure. Furthermore, we present evidence that as a first approximation, this decrease is driven by declines in intra sector labor shares as opposed to movements in activity towards sectors with lower labor shares.

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Bibliographic Info

Paper provided by Human Development Report Office (HDRO), United Nations Development Programme (UNDP) in its series Human Development Research Papers (2009 to present) with number HDRP-2010-36.

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Length: 31 pages
Date of creation: Nov 2010
Date of revision:
Publication status: Published as background research for the 2010 Human Development Report.
Handle: RePEc:hdr:papers:hdrp-2010-36

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Related research

Keywords: Factor Shares; Human Development; Human Development Index; Labor Shares; Self-Employment;

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References

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  1. Alan Krueger, 1999. "Measuring Labor's Share," Working Papers 792, Princeton University, Department of Economics, Industrial Relations Section..
  2. Timmer, Marcel P. & Szirmai, Adam, 2000. "Productivity growth in Asian manufacturing: the structural bonus hypothesis examined," Structural Change and Economic Dynamics, Elsevier, vol. 11(4), pages 371-392, December.
  3. Luis F. Lopez-Calva & Nora Lustig, 2009. "The recent decline of inequality in Latin America: Argentina, Brazil, Mexico and Peru," Working Papers 140, ECINEQ, Society for the Study of Economic Inequality.
  4. Branko Milanovic, 2005. "Global Income Inequality: What It Is And Why It Matters?," HEW 0512001, EconWPA.
  5. Sudhir Anand & Paul Segal, 2008. "What Do We Know about Global Income Inequality?," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 57-94, March.
  6. Branko Milanovic, 2003. "The Ricardian Vice: Why Sala-i-Martin’s calculations of world income inequality are wrong," HEW 0305003, EconWPA.
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Citations

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Cited by:
  1. Mathieu Dufour & Ozgur Orhangazi, 2009. "The 2000-2001 Financial Crisis in Turkey: A Crisis for Whom?," Review of Political Economy, Taylor & Francis Journals, vol. 21(1), pages 101-122.
  2. Loukas Karabarbounis & Brent Neiman, 2012. "Declining Labor Shares and the Global Rise of Corporate Saving," NBER Working Papers 18154, National Bureau of Economic Research, Inc.
  3. Peter Paz & Carlos Urrutia, 2014. "Economic Growth and Wage Stagnation in Peru: 1998-2012," Working Papers 2014-5, Peruvian Economic Association.
  4. J. Stephen Ferris, 2012. "The Relationship Between Government Size and Economic Performance with Particular Application to New Zealand," Carleton Economic Papers 12-06, Carleton University, Department of Economics, revised 25 Apr 2013.
  5. Dünhaupt, Petra, 2013. "Determinants of functional income distribution : theory and empirical evidence," ILO Working Papers 484122, International Labour Organization.
  6. Thomas Goda, 2013. "Changes in income inequality from a global perspective: an overview," Working Papers PKWP1303, Post Keynesian Economics Study Group (PKSG).
  7. Jan Behringer & Till van Treeck, 2013. "Income distribution and current account: A sectoral perspective," IMK Working Paper 125-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  8. Brent Neiman, 2013. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 61-103.
  9. Christian Belabed & Thomas Theobald & Till van Treeck, 2013. "Income Distribution and Current Account Imbalances," INET Research Notes 36, Institute for New Economic Thinking (INET).
  10. Ugur, Mehmet, 2012. "Market Power, Governance and Innovation: OECD Evidence," MPRA Paper 44141, University Library of Munich, Germany.

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