The Global Decline of the Labor Share

Loukas Karabarbounis and Brent Neiman

No 19136, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has significantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced firms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares such as increasing profits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics.

JEL-codes: E21 E22 E25 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-lab, nep-mac, nep-opm and nep-pke
Note: EFG IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (316)

Published as Brent Neiman, 2013. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 61-103.

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Journal Article: The Global Decline of the Labor Share (2014)
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