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The decline of labour share in OECD and non-OECD since the 1980s

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  • Veasna Kheng
  • Justin Mckinley
  • Lei Pan

Abstract

This paper examines the causes of falling labour share in OECD and non-OECD countries since the 1980s by using Karabarbounis and Neiman’s (2014) labour share model. While both groups of countries experience an elasticity of substitution between capital and labour, the factors driving down labour share are different. In OECD countries, export and volatility are key drivers, but in non-OECD countries, the significant factors are financial openness and the capital’s relative price. Overall, technological advancement – as reflected by declining capital’s relative price – coupled with globalization and low economic risk are key factors in explaining a long-term decline of labour share worldwide.

Suggested Citation

  • Veasna Kheng & Justin Mckinley & Lei Pan, 2024. "The decline of labour share in OECD and non-OECD since the 1980s," Applied Economics, Taylor & Francis Journals, vol. 56(16), pages 1899-1915, April.
    • Handle: RePEc:taf:applec:v:56:y:2024:i:16:p:1899-1915
    DOI: 10.1080/00036846.2023.2177604
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    Cited by:

    1. Bouazizi, Youssef & Oulmakki, Ouail & Savard, Luc & Verny, Jérôme, 2025. "The decline of the wage share in value-added: What have we learned from North African firms?," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 150-162.
    2. Kheng, Veasna & Pan, Lei & Fan, Xiaodong, 2025. "Human Capital: “Travel Broadens the Mind”," MPRA Paper 124156, University Library of Munich, Germany.
    3. Zhang, Hao & Wang, Feng & Fan, Wenna & Jiang, Hongfei & Ling, Rui & Liu, Juan, 2025. "Estimation of capital stock and the elasticity of capital-labor substitution in provincial industries in China," International Review of Economics & Finance, Elsevier, vol. 102(C).
    4. Cheng, Rui & Li, Jing & Wu, Ting, 2024. "Competition policy and labor income share: Evidence from the antitrust policy in China," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 966-977.

    More about this item

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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