The Global Decline of the Labor Share
The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has significantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced firms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares such as increasing profits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics.
|Date of creation:||Jun 2013|
|Date of revision:|
|Publication status:||published as Brent Neiman, 2013. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 61-103.|
|Note:||EFG IFM ME|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Barro, 1995.
"Inflation and Economic Growth,"
NBER Working Papers
5326, National Bureau of Economic Research, Inc.
- Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
- Basu, Susanto & Fernald, John G., 2002.
"Aggregate productivity and aggregate technology,"
European Economic Review,
Elsevier, vol. 46(6), pages 963-991, June.
- Olivier Blanchard & Francesco Giavazzi, .
"Macroeconomic effects of regulation and deregulation in goods and labor markets,"
187, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August.
- Blanchard, Olivier J & Giavazzi, Francesco, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labour Markets," CEPR Discussion Papers 2713, C.E.P.R. Discussion Papers.
- Olivier Blanchard & Francesco Giavazzi, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," NBER Working Papers 8120, National Bureau of Economic Research, Inc.
- Chang-Tai Hsieh & Peter J. Klenow, 2007.
"Relative Prices and Relative Prosperity,"
American Economic Review,
American Economic Association, vol. 97(3), pages 562-585, June.
- John Fernald & Brent Neiman, 2010.
"Growth Accounting with Misallocation: Or, Doing Less with More in Singapore,"
NBER Working Papers
16043, National Bureau of Economic Research, Inc.
- John Fernald & Brent Neiman, 2011. "Growth Accounting with Misallocation: Or, Doing Less with More in Singapore," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(2), pages 29-74, April.
- John Fernald & Brent Neiman, 2006. "Measuring the Miracle: Market Imperfections and Asia's Growth Experience," 2006 Meeting Papers 785, Society for Economic Dynamics.
- John Fernald & Brent Neiman, 2006. "Measuring the miracle: market imperfections and Asia's growth experience," Working Paper Series 2006-17, Federal Reserve Bank of San Francisco.
- John Fernald & Brent Neiman, 2003. "Measuring productivity growth in Asia: do market imperfections matter?," Working Paper Series WP-03-15, Federal Reserve Bank of Chicago.
- John Fernald & Brent Neiman, 2010. "Growth accounting with misallocation: Or, doing less with more in Singapore," Working Paper Series 2010-18, Federal Reserve Bank of San Francisco.
- Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
- Loukas Karabarbounis & Brent Neiman, 2012. "Declining Labor Shares and the Global Rise of Corporate Saving," NBER Working Papers 18154, National Bureau of Economic Research, Inc.
- Douglas Gollin, 2001.
"Getting Income Shares Right,"
Department of Economics Working Papers
2001-11, Department of Economics, Williams College.
- Ríos-Rull, José-Víctor & Santaeulàlia-Llopis, Raül, 2010. "Redistributive shocks and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 931-948, November.
- Francisco Rodriguez & Arjun Jayadev, 2010. "The Declining Labor Share of Income," Human Development Research Papers (2009 to present) HDRP-2010-36, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
- Miguel A. Le�n-Ledesma & Peter McAdam & Alpo Willman, 2010.
"Identifying the Elasticity of Substitution with Biased Technical Change,"
American Economic Review,
American Economic Association, vol. 100(4), pages 1330-57, September.
- León-Ledesma, Miguel A. & McAdam, Peter & Willman, Alpo, 2009. "Identifying the elasticity of substitution with biased technical change," Working Paper Series 1001, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:19136. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.