Working Paper: CEPR ID: DP16473
Authors: Gene M. Grossman; Ezra Oberfield
Abstract: A vast literature seeks to measure and explain the apparent decline in the labor share in national income that has occurred in recent times in the United States and elsewhere. The culprits include technological change, increased globalization and the rise of China, the enhanced exercise of market power by large firms in concentrated product markets, the decline in unionization rates and the erosion in the bargaining power of workers in labor markets, and the changing composition of the workforce due to a slowdown in population growth and a rise in educational attainment. We review this literature, with special emphasis on the pitfalls associated with using cross-sectional data to assess this phenomenon and the reasons why the body of papers collectively explains the phenomenon many times over.
Keywords: labor share; capital share; profit share; income distribution
JEL Codes: E25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological change (O33) | decline in labor share (E25) |
| Factor-biased technical change (O33) | decline in labor share (E25) |
| Globalization (F60) | decline in labor share (E25) |
| Increased market power among large firms (L11) | decline in labor share (E25) |
| Decline in unionization (J50) | decline in labor share (E25) |
| Changing composition of workforce (J21) | decline in labor share (E25) |