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What Determines the Capital Share over the Long Run of History?

Author

Listed:
  • Erik Bengtsson

    (Lund University [Lund], GU - University of Gothenburg)

  • Enrico Rubolino

    (University of Essex)

  • Daniel Waldenström

    (IFN Stockholm, WIL - World Inequality Lab , CESifo - CESifo - Munich, CEPR - Center for Economic Policy Research - CEPR)

Abstract

This paper analyzes the determinants of the labor-capital split in national income for 20 countries since the late 1800s. Our main identification strategy focuses on unique historical quasi-experimental events: i) the introduction of universal suffrage, ii) close election wins of left-wing governments, iii) decolonization, iv) unionization shocks, and v) wars. We also run instrumented panel regressions. Our findings show that the capital share decreased in response to radical institu- tional and political shifts, such as the introduction of universal suffrage in the early 1900s, the undoing of colonialism and the implementation of redistributive policies during the post-war period. By contrast, the capital share increased following the erosion of trade unionism since the 1980s. Wars, despite destroying the capital stock, generated windfall profits that increased the capital share.

Suggested Citation

  • Erik Bengtsson & Enrico Rubolino & Daniel Waldenström, 2020. "What Determines the Capital Share over the Long Run of History?," World Inequality Lab Working Papers hal-02876964, HAL.
  • Handle: RePEc:hal:wilwps:hal-02876964
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/hal-02876964
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    References listed on IDEAS

    as
    1. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2009. "The long-run determinants of inequality: What can we learn from top income data?," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 974-988, August.
    2. Odd Aukrust & Juul Bjerke, 1959. "Real Capital And Economic Growth In Norway 1900–56," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 8(1), pages 80-118, March.
    3. Erik Bengtsson, 2014. "Do unions redistribute income from capital to labour? Union density and wage shares since 1960," Industrial Relations Journal, Wiley Blackwell, vol. 45(5), pages 389-408, September.
    4. Thomas, Ryland & Hills, Sally & Dimsdale, Nicholas, 2010. "The UK recession in context — what do three centuries of data tell us?," Bank of England Quarterly Bulletin, Bank of England, vol. 50(4), pages 277-291.
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    Cited by:

    1. Bukowski, Pawel & Novokmet, Filip, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," LSE Research Online Documents on Economics 110221, London School of Economics and Political Science, LSE Library.
    2. Paweł Bukowski & Filip Novokmet, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," Journal of Economic Growth, Springer, vol. 26(2), pages 187-239, June.

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    More about this item

    Keywords

    Capital Share; wealth; wealth inequality; Inequality; Factor shares; Event study; Economic history; Institutions World Inequality Lab;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • N00 - Economic History - - General - - - General

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