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Explaining Movements in the Labour Share

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  • Bentolila, Samuel
  • Saint-Paul, Gilles

Abstract

In this paper we study the evolution of the labour share in the OECD since 1970. We present a theoretical model showing that it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or the skill mix; and that discrepancies between the marginal product of labour and the real wage (due to, e.g. product market power, union bargaining, and labour adjustment costs) cause departures from it. We estimate the model with panel data on 15 industries and 14 countries for 1973-93 and derive the evolution of the wage gap in Germany and the United States.

Suggested Citation

  • Bentolila, Samuel & Saint-Paul, Gilles, 1998. "Explaining Movements in the Labour Share," CEPR Discussion Papers 1958, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1958
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    More about this item

    Keywords

    capital-output ratio; labour share;

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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