Has the Labour Share Declined?: It Depends

Taehyoung Cho, Soobin Hwang and Paul Schreyer
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Taehyoung Cho: Bank of Korea
Soobin Hwang: Bank of Korea
Paul Schreyer: OECD

No 2017/1, OECD Statistics Working Papers from OECD Publishing

Abstract: We revisit the issue of how best to measure the labour and capital shares in OECD economies, distinguishing between production- and income-based perspectives. The former adopts a producer perspective with gross income as a reference: it uses a production function in a market setting. The latter adopts a consumer perspective with net income as a reference, taking account of depreciation and including taxes and subsidies as perceived by final consumers. We confirm a statistically significant but small decline in the labour share across OECD countries over the past two decades under a production perspective. But this appears to result mainly from a rise in the gross capital share caused by rising depreciation rates. Accordingly, we find little or no decline in the labour share under an income perspective, where income is measured net and after depreciation. Using a novel dataset from Korea, we further dissect the capital share and suggest that in periods of price bubbles of land, rising asset values are a key element behind rising capital shares. We also show how introducing land prices can explain how both labour shares and real prices of investment goods can decline without assuming a large elasticity of substitution between labour and capital.

Keywords: capital share; functional distribution; labour share (search for similar items in EconPapers)
JEL-codes: D33 (search for similar items in EconPapers)
Date: 2017-01-28
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:stdaaa:2017/1-en

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