Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence

Mai Dao, Mitali Das (), Zsoka Koczan and Weicheng Lian

No 2017/169, IMF Working Papers from International Monetary Fund

Abstract: This paper documents the downward trend in the labor share of global income since the early 1990s, as well as its heterogeneous evolution across countries, industries and worker skill groups, using a newly assembled dataset, and analyzes the drivers behind it. Technological progress, along with varying exposure to routine occupations, explains about half the overall decline in advanced economies, with a larger negative impact on middle-skilled workers. In emerging markets, the labor share evolution is explained predominantly by global integration, particularly the expansion of global value chains that contributed to raising the overall capital intensity in production.

Keywords: WP; income share; share of income; advanced economy; labor share; routinization; automation; global value chains; shift-share analysis; developing economy; labor share decline; low-labor-share sector; labor share dynamics; Emerging and frontier financial markets; Global (search for similar items in EconPapers)
Pages: 70
Date: 2017-07-24
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Citations: View citations in EconPapers (141)

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