The Global Upward Trend in the Profit Share

Luci Ellis and Kathryn Smith

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2010, vol. 56, issue 3, 231-256

Abstract: The profit share—the share of factor income going to capital—has trended upwards since about the mid 1980s in most developed economies. Not all of the possible explanations for this are consistent with the timing or the cross-country pattern of the data. Our preferred explanation is that technological progress has increased the rate of obsolescence of capital goods. This induces faster churn in both capital and jobs, which endogenously puts firms in a stronger bargaining position. The effect is larger where there is stronger labour and product market regulation.

Keywords: profit share; wage share; technological progress; regulation (search for similar items in EconPapers)
JEL-codes: L13 L32 (search for similar items in EconPapers)
Date: 2010
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Working Paper: The global upward trend in the profit share (2007)
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