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The Elusive Explanation for the Declining Labor Share

Author

Listed:
  • Ezra Oberfield

    (Department of Economics, Princeton University, Princeton, New Jersey, USA)

  • Gene M. Grossman

    (Department of Economics, Princeton University, Princeton, New Jersey, USA)

Abstract

A vast literature seeks to measure and explain the apparent decline in the labor share in national income that has occurred in recent times in the United States and elsewhere. The culprits include technological change, increased globalization and the rise of China, the enhanced exercise of market power by large firms in concentrated product markets, the decline in unionization rates and the erosion in the bargaining power of workers in labor markets, and the changing composition of the workforce due to a slowdown in population growth and a rise in educational attaintment. We review this literature, with special emphasis on the pitfalls associated with using cross-sectional data to assess this phenomenon and the reasons why the body of papers collectively explains the phenomenon many times over.

Suggested Citation

  • Ezra Oberfield & Gene M. Grossman, 2022. "The Elusive Explanation for the Declining Labor Share," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 93-124, August.
    • Handle: RePEc:anr:reveco:v:14:y:2022:p:93-124
    DOI: 10.1146/annurev-economics-080921-103046
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    Keywords

    labor share; capital share; profit share; income distribution;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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