 Effects of innovation and markups on employment and labour share in OECD industriesMehmet Ugur Structural Change and Economic Dynamics, 2024, vol. 71, issue C, 221-234 Abstract: This paper takes issue with what I describe as a single focus on either innovation or market power as potential determinants of employment or labour share. Drawing on a constant elasticity of substitution (CES) production function and EU- KLEMS data on OECD industries, I demonstrate that the unifocal approach is not justified theoretically or empirically. I report that: (i) employment and labour share depends on both innovation and market power; (ii) market power's direct effects on both outcomes are always negative and large; (iii) innovation's direct effects are small and depend on the elasticity of substitution between capital and labour; and (iv) innovation and market power have substitute interactive effects that exacerbate the fall in employment or labour share. I conclude that the main driver of the decline in labour share and/or employment is not technological innovation as such but the level of rents that innovating firms are able to extract. Keywords: Technological change; Markups; Labour share; Elasticity of substitution (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:71:y:2024:i:c:p:221-234 DOI: 10.1016/j.strueco.2024.07.011 Access Statistics for this article Structural Change and Economic Dynamics is currently edited by F. Duchin, H. Hagemann, M. Landesmann, R. Scazzieri, A. Steenge and B. Verspagen More articles in Structural Change and Economic Dynamics from Elsevier |
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