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Latent changes in the labour share

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  • Maarten Goos
  • Ellen van't Klooster

Abstract

The canonical model of automation introduced by Acemoglu and Restrepo in 2019 (Journal of Economic Perspectives, 33 (2), 3–30) unambiguously predicts a decline in the labour share within sectors. Decomposing changes in the US labour share into within‐sector and between‐sector components, they show that within‐sector changes indeed account for the bulk of the recent decline in the US labour share, while overall between‐sector changes are quantitatively unimportant. However, by extending their single‐sector framework to a multi‐sector model and rooting it in an empirically tractable decomposition, in this paper we show that the small overall between‐sector component conceals substantial, though offsetting, equilibrium changes in consumer demand resulting from sector‐specific changes in factor quantities and total factor productivity growth. Although these equilibrium forces have not affected overall between‐sector changes in the US labour share so far, their importance indicates that ever‐declining labour shares due to technological progress, such as artificial intelligence, are not inevitable in the future.

Suggested Citation

  • Maarten Goos & Ellen van't Klooster, 2026. "Latent changes in the labour share," Fiscal Studies, John Wiley & Sons, vol. 47(1), pages 7-23, March.
    • Handle: RePEc:wly:fistud:v:47:y:2026:i:1:p:7-23
    DOI: 10.1111/1475-5890.70019
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