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The Labor Share in the Long Term: A Decline?

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  • Gilbert Cette

    (Centre de recherche de la Banque de France - Banque de France, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université)

  • Lorraine Koehl

    (INSEE)

  • Thomas Philippon

    (NYU - New York University [New York] - NYU - NYU System)

Abstract

We challenge the accepted wisdom of a global secular decline in the labor share. A simple theoretical model is proposed to highlight the main factors of change in the labor share. We document three issues in the existing literature: (i) starting periods for the empirical analysis; (ii) accounting for self employment; and (iii) accounting for residential real estate income. An empirical analysis is carried out since the post war period for France and the United States, and since the 1990s for ten developed countries and on a six country "euro area". How the three questions above are addressed is crucial to the diagnosis. When the biases that may arise with the three issues mentioned above are eliminated, the labor share in the market sector does not show a general downward or upward trend. The choice of period has a huge impact, as does the treatment of real estate services, whose inclusion or not in the value added can result in significantly different trends.

Suggested Citation

  • Gilbert Cette & Lorraine Koehl & Thomas Philippon, 2019. "The Labor Share in the Long Term: A Decline?," Post-Print hal-02446713, HAL.
  • Handle: RePEc:hal:journl:hal-02446713
    DOI: 10.24187/ecostat.2019.510t.1993
    Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-02446713
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    Cited by:

    1. Cette Gilbert & Nevoux Sandra & Py Loriane, 2020. "The Impact of ICTs and Digitalization on Productivity and Labor Share: Evidence from French firms," Working papers 785, Banque de France.
    2. Fernández-Villaverde, Jesús & Mandelman, Federico & Yu, Yang & Zanetti, Francesco, 2021. "The “Matthew effect” and market concentration: Search complementarities and monopsony power," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 62-90.
    3. d’Albis, Hippolyte & Boubtane, Ekrame & Coulibaly, Dramane, 2021. "Demographic changes and the labor income share," European Economic Review, Elsevier, vol. 131(C).
    4. Alessandro Bellocchi & Giovanni Marin & Giuseppe Travaglini, 2021. "The Great Fall of Labor Share:Micro Determinants for EU Countries Over 2011-2019," Working Papers 2102, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2021.
    5. Aghion, Philippe & Bergeaud, Antonin & Van Reenen, John, 2021. "The Impact of Regulation on Innovation," IZA Discussion Papers 14082, Institute of Labor Economics (IZA).
    6. ADACHI Daisuke & SAITO Yukiko, 2020. "Multinational Production and Labor Share," Discussion papers 20012, Research Institute of Economy, Trade and Industry (RIETI).
    7. Matthew Fisher-Post, 2020. "Factor Shares in the long run," World Inequality Lab Working Papers hal-02876978, HAL.
    8. Philippe Aghion & Antonin Bergeaud & Huiyu Li & Peter Klenow & Timo Boppart, 2019. "A Theory of Falling Growth and Rising Rents," 2019 Meeting Papers 458, Society for Economic Dynamics.
    9. Matthew Fisher-Post, 2020. "Factor Shares in the long run," Working Papers hal-02876978, HAL.
    10. Odran Bonnet & Guillaume Chapelle & Alain Trannoy & Etienne Wasmer, 2019. "Secular trends in Wealth and Heterogeneous Capital: Land is back...and should be taxed," Sciences Po publications 92, Sciences Po.
    11. Cette, Gilbert & Koehl, Lorraine & Philippon, Thomas, 2020. "Labor share," Economics Letters, Elsevier, vol. 188(C).
    12. Mondolo, Jasmine, 2020. "Macro and microeconomic evidence on investment, factor shares, firm and labor dynamics in Italy and in Trentino," MPRA Paper 99138, University Library of Munich, Germany.
    13. Song, Eunbi, 2021. "What drives labor share change? Evidence from Korean industries," Economic Modelling, Elsevier, vol. 94(C), pages 370-385.
    14. repec:iab:iabfda:201909(en is not listed on IDEAS

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    More about this item

    Keywords

    labor share; labor cost; value added sharing;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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