Capitalization of Intellectual Property Products Does Not Explain the Decline in the Labor Share

Simcha Barkai, Surech Nallareddy and Maria Ogneva
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Simcha Barkai: Boston College
Surech Nallareddy: University of Washington

Review of Economic Dynamics, 2025, vol. 56

Abstract: We reevaluate the role of the capitalization of Intellectual Property Products (IPP) in the decline in the labor share. Using the same aggregate U.S. data as Koh et al. (2020), we show that the labor share has clearly declined in recent decades and that this decline does not depend on the capitalization of IPP. The approach of KSLZ, which estimates a linear time trend for the period 1929–2018, conflates a gradual and long-run increase in IPP investment with a decline in the labor share in recent decades. In addition, in both aggregate and industry data, we show that the increase in the rate of IPP investment is nearly fully offset by depreciation. As a consequence, the labor share of net value added and its decline in recent decades are insensitive to IPP capitalization. (Copyright: Elsevier)

Date: 2025
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DOI: 10.1016/j.red.2024.101268

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