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The long and short of labor share dynamics: Capital, unions, and sectoral heterogeneity in U.S. manufacturing

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  • Sarangi, Swayamsiddha

Abstract

This paper analyzes the decline in payroll shares across U.S. manufacturing subsectors from 1989 to 2018 by examining the short-run and long-run effects of three covariates: capital deepening, unionization coverage, and import penetration, using a Pooled Mean Group estimation strategy. The findings suggest that capital deepening and declining unionization reduce payroll shares in the long-run, while import penetration raises payroll shares in the long-run. Short-run effects are heterogeneous across subsectors. These findings are discussed in light of the evolving fragmentation of the manufacturing sector into low-payroll-share and high-payroll-share subsectors. These dynamics suggest that the determinants of income distribution are technological, institutional, and trade-induced, thereby challenging a ‘one-size-fits-all’ policy approach and calling for subsector-specific interventions.

Suggested Citation

  • Sarangi, Swayamsiddha, 2026. "The long and short of labor share dynamics: Capital, unions, and sectoral heterogeneity in U.S. manufacturing," Economic Modelling, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:ecmode:v:164:y:2026:i:c:s0264999326003196
    DOI: 10.1016/j.econmod.2026.107790
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    Keywords

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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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