Working Paper: CEPR ID: DP16857
Authors: Berthold Herrendorf; Benjamin Bridgman
Abstract: The literature has suggested many possible reasons for the recent decrease in the U.S. labor share. We build a multi-sector model with input-output linkages that allows us to identify the key driving forces. We find that the decrease in the U.S. labor share reflects both sectoral forces, which can be identified with micro or NIPA data, and aggregation effects, which can be identified only with NIPA data. Specifically, we find that the main force was an increase in sectoral markups, which input-output linkages importantly amplified.
Keywords: Double Marginalization; Input-Output Linkages; Labor Share; Markups; Outsourcing; Structural Change
JEL Codes: D33; L4; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in sectoral markups (L16) | decrease in labor share (E25) |
| input-output linkages (D57) | decrease in labor share (E25) |
| sectoral output elasticities of labor (J39) | decrease in labor share (E25) |
| capital deepening (E22) | decrease in labor share (E25) |
| outsourcing (L24) | decrease in labor share (E25) |