What drives labor share change? Evidence from Korean industries

Eunbi Song

Economic Modelling, 2021, vol. 94, issue C, 370-385

Abstract: Using aggregate- and industry-level data, this study shows the role of factor substitution and technological progress in labor share change in Korea over the past 30 years. Aggregate labor share shows a declining trend while masking the divergence in labor share at the industry level. The industry-level analysis provides evidence that in major capital-intensive industries with high substitutability between capital and labor such as electronics, an increase in the capital-to-labor ratio tends to be associated with a fall in the labor share. Given their rapid growth in value-added, these industries play a key role in the declining aggregate labor share. Service industries such as finance, with rapid labor-augmenting technological progress and low substitutability, have also contributed to the declining aggregate labor share.

Keywords: Factor substitution; Labor-augmenting technological change; Labor share; Korea (search for similar items in EconPapers)
JEL-codes: D24 E13 E23 E25 O11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:94:y:2021:i:c:p:370-385

DOI: 10.1016/j.econmod.2020.10.009

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