NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Global Decline of the Labor Share

Loukas Karabarbounis, Brent Neiman

NBER Working Paper No. 19136
Issued in June 2013
NBER Program(s):   EFG   IFM   ME

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.

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This paper was revised on October 7, 2013

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19136

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

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