IDEAS home Printed from https://ideas.repec.org/p/bfi/wpaper/2026-58.html

Intermediate Input Prices and the Labor Share

Author

Listed:
  • Juanma Castro-Vincenzi

    (The University of Chicago, Department of Economics and NBER)

  • Benny Kleinman

    (Stanford University, Department of Economics and NBER)

Abstract

We argue that the relative price of materials is an important determinant of the labor share of income. When materials and primary inputs are complements and the profit share is positive, a higher price of materials lowers the labor share and raises the profit share of value added, without requiring markups or returns to scale to change. We show that materials-price fluctuations align with U.S. labor-share trends, provide causal evidence on this mechanism across industries and commuting zones, and quantify its importance in a dynamic quantitative model. Finally, we use our mechanism to rationalize differential labor-share trends across countries. Length: 103 pages

Suggested Citation

  • Juanma Castro-Vincenzi & Benny Kleinman, 2026. "Intermediate Input Prices and the Labor Share," Working Papers 2026-58, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2026-58
    as

    Download full text from publisher

    File URL: https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_2026-58.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Daron Acemoglu & Pascual Restrepo, 2018. "The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment," American Economic Review, American Economic Association, vol. 108(6), pages 1488-1542, June.
    2. Christiane Baumeister & Lutz Kilian, 2016. "Forty Years of Oil Price Fluctuations: Why the Price of Oil May Still Surprise Us," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 139-160, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joao Ayres & Constantino Hevia & Juan Pablo Nicolini, 2021. "Real Exchange Rates and Primary Commodity Prices: Mussa Meets Backus-Smith," Working Papers 89, Red Nacional de Investigadores en Economía (RedNIE).
    2. Jiang, Kai & Xin, Baogui & Santibanez Gonzalez, Ernesto D.R., 2025. "Can industrial intelligence promote net-zero development? An analysis of resource dependence," The North American Journal of Economics and Finance, Elsevier, vol. 78(C).
    3. Luca Fornaro & Martin Wolf, 2026. "Macroeconomic Policies for AI," Working Papers 1576, Barcelona School of Economics.
    4. Jen-Yu Lee & Tien-Thinh Nguyen & Hong-Giang Nguyen & Jen-Yao Lee, 2022. "Towards Predictive Crude Oil Purchase: A Case Study in the USA and Europe," Energies, MDPI, vol. 15(11), pages 1-15, May.
    5. Dennis C. Hutschenreiter & Tommaso Santini & Eugenia Vella, 2022. "Automation and sectoral reallocation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 13(1), pages 335-362, May.
    6. Josten, Cecily & Lordan, Grace, 2019. "Robots at Work: Automatable and Non Automatable Jobs," IZA Discussion Papers 12520, IZA Network @ LISER.
    7. Basso, Henrique S. & Jimeno, Juan F., 2021. "From secular stagnation to robocalypse? Implications of demographic and technological changes," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 833-847.
    8. Cao, Ruiqing & Guo, Fei & Shi, Chenchen & Li, Bin, 2026. "Digital government construction and inter-regional capital flows: Based on the perspective of inter-regional mergers and acquisitions," International Review of Economics & Finance, Elsevier, vol. 107(C).
    9. Kyoji Fukao & Cristiano Perugini, 2021. "The Long‐Run Dynamics of the Labor Share in Japan," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 445-480, June.
    10. Kruse-Becher, Robinson & Letixerant, Philip, 2025. "Oil price expectations in explosive phases," Energy Economics, Elsevier, vol. 152(C).
    11. Pu, Guifang & Xie, Yanxiang & Wu, Lidong & Wang, Kai, 2024. "Industrial robots and corporate risk-taking value," Finance Research Letters, Elsevier, vol. 70(C).
    12. Alessandro Paolo Rigamonti & Giulio Greco & Mariarita Pierotti & Alessandro Capocchi, 2024. "Macroeconomic uncertainty and earnings management: evidence from commodity firms," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1615-1649, May.
    13. Chau Tran Bao & Khoi Nguyen Dinh Nguyen & Ha Nguyen Manh & Ngan Nguyen Thi Thuy, 2026. "The Urban-Rural Divide in the Age of Artificial Intelligence: Assessing the Effects of Technology and Automation on Regional Labor Markets," Papers 2606.22833, arXiv.org.
    14. Pham T. T. Trinh & Bui T. T. My, 2023. "The impact of world oil price shocks on macroeconomic variables in Vietnam: the transmission through domestic oil price," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 37(1), pages 67-87, May.
    15. Qihang Li & Yituan Liu & Wenjie Li & Linman Zheng, 2025. "Will Industrial Robots Terminate Enterprise Innovation?—An Empirical Evidence from China’s Enterprise Robot Penetration," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 10074-10103, June.
    16. Matteo G. Richiardi & Luis Valenzuela, 2024. "Firm heterogeneity and the aggregate labour share," LABOUR, CEIS, vol. 38(1), pages 66-101, March.
    17. Gao, Jie & Li, Zhizhuo & Nguyen, Thithuha & Zhang, Wentao, 2025. "Digital transformation and enterprise employment," International Review of Economics & Finance, Elsevier, vol. 99(C).
    18. Xi, Yipeng & Mai, Luu Thuc Ngan, 2025. "Shifting tides: How public perceptions of GPT regulation evolved before and after GPT-4 on Quora," Telecommunications Policy, Elsevier, vol. 49(7).
    19. Matthew Ross, 2021. "The Effect of Intensive Margin Changes to Task Content on Employment Dynamics over the Business Cycle," ILR Review, Cornell University, ILR School, vol. 74(4), pages 1036-1064, August.
    20. Xu, Shaofeng & Meng, Qiqing & Zhang, Ziyang, 2026. "On the rise of teleworkable jobs in the US," Economics Letters, Elsevier, vol. 265(C).

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfi:wpaper:2026-58. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Toni Shears The email address of this maintainer does not seem to be valid anymore. Please ask Toni Shears to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/mfichus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.