The labour income share and the relative price of investment in the US: an empirical investigation

Edouard Wemy

Applied Economics, 2019, vol. 51, issue 43, 4711-4725

Abstract: Several studies argue that the recent decline in the secular trend of the labour income share is mostly driven by capital-embodied technological progress which is typically identified with trend reductions in the relative price of investment. In this paper, I use data from the United States to assess the nature of the relationship between trends in the labour share and the relative price of investment. Results from co-integration tests reveal that the share and the relative price of investment are most likely not co-integrated. However, co-variation tests indicate that both time series share a common stochastic component, and additional tests of structural breaks point at the presence of a common change in the mean or trend of both series. These results suggest that capital-embodied or investment-specific technological progress may have played an important role in the decline of the secular trend of the labour share.

Date: 2019
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DOI: 10.1080/00036846.2019.1597254

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