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The Trend in Labour Income Share: the Role of Technological Change and Imperfect Labour Markets

Francesco Carbonero (), Christian Offermanns and Enzo Weber

No 173, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: The non-constancy of factor shares is drawing the attention of many researchers. We document an average drop of the labour share of 8 percentage points for eight European countries and the US between 1980 and 2007. We investigate theoretically and empirically two mechanisms: the substitution between Information Communication Technology (ICT) and labour and the presence of hiring costs. We find that the ICT-labour replacement is a promising channel to explain the decline of the labour share, though labour market frictions takes part of its explanatory power over. In particular, hiring costs have a bigger role in Europe than in the US. Finally, by modelling the elasticity of substitution between ICT and labour as a function of institutional and structural variables, we find that it correlates with the share of routine occupations (positively) and with the share of high-skill workers (negatively).

New Economics Papers: this item is included in nep-eur, nep-lab and nep-tid
Date: 2017-09
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http://www.bgpe.de/texte/DP/173_CarboneroOffermannsWeber.pdf First version, 2017 (application/pdf)

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Working Paper: The fall of the labour income share: the role of technological change and imperfect labour markets (2017) Downloads
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