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Capital’s grabbing hand? A cross-industry analysis of the decline of the labor share in OECD countries

Andrea Bassanini () and Thomas Manfredi ()
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Thomas Manfredi: OECD

Eurasian Business Review, 2014, vol. 4, issue 1, 3-30

Abstract: Abstract We examine the determinants of the within-industry decline of the labor share, using industry-level annual data for 25 OECD countries, 20 business-sector industries and covering up to 28 years. We find that total factor productivity growth—which captures (albeit imprecisely) capital-augmenting or labor-replacing technical change—and capital deepening jointly account for as much as 80 % of the within-industry contraction of the labor share. We also find that another factor explaining the aggregate decline of the labor share is the increased international competition, with higher import penetration causing a contraction of the share of labour-intensive industries in total value added. However, the fraction of the drop of the labor share explained by international competition remains limited.

Keywords: Labor share; Technical change; Total factor productivity; Capital deepening; International competition; FDI regulation (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:spr:eurasi:v:4:y:2014:i:1:d:10.1007_s40821-014-0004-y