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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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    References listed on IDEAS

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    1. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
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    3. Kang, Wensheng & Ratti, Ronald. A. & Vespignani, Joaquin, 2016. "Global uncertainty and the global economy: Decomposing the impact of uncertainty shocks," Working Papers 2016-01, University of Tasmania, Tasmanian School of Business and Economics.
    4. David Autor & David Dorn & Lawrence F Katz & Christina Patterson & John Van Reenen, 2020. "The Fall of the Labor Share and the Rise of Superstar Firms [“Automation and New Tasks: How Technology Displaces and Reinstates Labor”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 645-709.
    5. Michael Elsby & Bart Hobijn & Ayseful Sahin, 2013. "The Decline of the U.S. Labor Share," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 1-63.
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    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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