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One of the things we know that ain't so: Is US labor's share relatively stable?

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  • Young, Andrew T.

Abstract

Solow (1958) argued that, from 1929 to 1954, US aggregate labor's share was not stable relative to what we would expect given individual industry labor's shares. I confirm and extend this result using data from 1958 to 1996 that includes 35 industries (roughly two-digit SIC level) and spans the entire US economy. Changes in industry shares in total value-added are essentially unrelated to aggregate labor's share movements. Industry labor's shares comovements contribute positively to aggregate labor's share movements. These findings give us a clearer perspective on one of the stylized facts of economic growth. If the great macroeconomic ratio is meaningful, it must be interpreted in terms of long-run, offsetting shifts in "services" industries versus "goods" industries, both in terms of their labor's shares and shares in total value-added. At least at an annual frequency, there is nothing particularly stable about aggregate labor's share.

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  • Young, Andrew T., 2010. "One of the things we know that ain't so: Is US labor's share relatively stable?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 90-102, March.
  • Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:90-102
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    Cited by:

    1. Willis, Geoff, 2011. "The Bowley Ratio," MPRA Paper 30852, University Library of Munich, Germany.
    2. Brad Sturgill & Hernando Zuleta, 2017. "Variable factor shares and the index number problem: a generalization. Abstract Factor shares vary over time and across countries, so incorporating variable factor shares into growth and development a," Economics Bulletin, AccessEcon, vol. 37(1), pages 30-37.
    3. Askenazy, P. & Cette, G. & Maarek, P., 2012. "Rent building, rent sharing - A panel country-industry empirical analysis," Working papers 369, Banque de France.
    4. Charpe, Matthieu & Kühn, Stefan, 2012. "Bargaining, Aggregate Demand and Employment," Dynare Working Papers 13, CEPREMAP.
    5. Remi Bazillier & Boris Najman, 2017. "Labour and Financial Crises: Is Labour Paying the Price of the Crisis?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, pages 55-76.
    6. Young, Andrew T. & Lawson, Robert A., 2014. "Capitalism and labor shares: A cross-country panel study," European Journal of Political Economy, Elsevier, vol. 33(C), pages 20-36.
    7. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
    8. Hernando Zuleta, 2008. "Factor Saving Innovations and Factor Income Shares," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 836-851, October.
    9. Willis, Geoff, 2011. "Why money trickles up – wealth & income distributions," MPRA Paper 30851, University Library of Munich, Germany.
    10. Chi, Wei & Qian, Xiaoye, 2013. "Regional disparity of labor's share in China: Evidence and explanation," China Economic Review, Elsevier, vol. 27(C), pages 277-293.
    11. Dennis, Benjamin N. & Iscan, Talan B., 2009. "Engel versus Baumol: Accounting for structural change using two centuries of U.S. data," Explorations in Economic History, Elsevier, vol. 46(2), pages 186-202, April.
    12. Luciano BOGGIO & Vincenzo DALL’AGLIO & Marco MAGNANI, 2010. "On Labour Shares in Recent Decades: A Survey," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 118(3), pages 283-333.
    13. Hernando Zuleta, 2007. "Biased technological change, human capital and factor shares," DOCUMENTOS DE TRABAJO 004380, UNIVERSIDAD DEL ROSARIO.
    14. Judzik, Dario & Sala, Hector, 2015. "The determinants of capital intensity in Japan and the US," Journal of the Japanese and International Economies, Elsevier, vol. 35(C), pages 78-98.
    15. Bárbara Cardoso Dias & Ana Urraca Ruiz, 2016. "A Mudança Estrutural Como Indutora Da Distribuição Funcional Da Renda No Brasil," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 021, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    16. Danko Tarabar & Joshua C. Hall, 2015. "The Seventeenth Amendment, Senate ideology and the growth of government," Applied Economics Letters, Taylor & Francis Journals, pages 637-640.
    17. Zuleta, Hernando & Young, Andrew T., 2013. "Labor shares in a model of induced innovation," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 112-122.
    18. George Backus & Thomas Lowry & Drake Warren, 2013. "The near-term risk of climate uncertainty among the U.S. states," Climatic Change, Springer, vol. 116(3), pages 495-522, February.
    19. Peiwen Bai & Wenli Cheng, 2014. "Relative Earnings and Firm Performance: Evidence from Publicly-listed Firms in China, 2005-2012," Monash Economics Working Papers 51-14, Monash University, Department of Economics.
    20. Hernando Zuleta & Andrew T. Young, 2007. "Labor's shares - aggregate and industry: accounting for both in a model of unbalanced growth with induced innovation," DOCUMENTOS DE TRABAJO 003105, UNIVERSIDAD DEL ROSARIO.
    21. Michael Siegenthaler & Tobias Stucki, 2014. "Dividing the Pie: The Determinants of Labor's Share of Income on the Firm Level," KOF Working papers 14-352, KOF Swiss Economic Institute, ETH Zurich.

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