The Decline of the Labor Share: New Empirical Evidence

We use time series techniques to estimate the importance of four main explanations for the decline of the US labor income share: rising firm markups, falling bargaining power of workers, higher investment-specific technology growth, and more automated production processes. Identification is achieved with restrictions derived from a stylized model of structural change. Our results point to automation as the main driver of the labor share, although rising markups have played an important role in the last 20 years. We also find evidence of capital-labor complementarity, suggesting that capital deepening may have raised the labor share. (JEL D21, D43, E25, J51, L23, O33, O41)

• Publication year

  2022

• Venue

  American Economic Journal: Macroeconomics

• Publication date

  2022-07-01

• Fields of study

  Not labeled

• Identifiers
  DOI 10.1257/mac.20190365
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

• Corporate tax cuts and the decline of the manufacturing labor share

  2022cited by this paper
• Uneven Growth: Automation's Impact on Income and Wealth Inequality

  2021cited by this paper
• Demographic changes and the labor income share

  2021cited by this paper
• Kaldor and Piketty’s facts: The rise of monopoly power in the United States

  2021cited by this paper
• The Rise of Market Power and the Macroeconomic Implications*

  2020cited by this paper
• Declining Labor and Capital Shares

  2020influential reference
• Demographic Origins of the Decline in Labor's Share

  2020cited by this paper
• Bargaining shocks and aggregate fluctuations

  2020cited by this paper
• Labor Share Decline and Intellectual Property Products Capital

  2020influential reference
• Revisiting the Global Decline of the (Non-housing) Labor Share

  2020cited by this paper
• Job Polarization and Jobless Recoveries

  2020cited by this paper
• Robots and Jobs: Evidence from US Labor Markets

  2019cited by this paper
• Identification of Financial Factors in Economic Fluctuations

  2019cited by this paper
• Deciphering the causes for the post-1990 slow output recoveries

  2019cited by this paper
• A Theory of Falling Growth and Rising Rents

  2019cited by this paper
• Appropriate Technology and Balanced Growth

  2019cited by this paper
• Are US Industries Becoming More Concentrated?*

  2019cited by this paper
• Automation, Growth and Factor Shares

  2018cited by this paper
• WORKING PAPER SERIES THE MICRO-LEVEL ANATOMY OF THE LABOR SHARE DECLINE

  2018cited by this paper
• Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share

  2018influential reference
• The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment

  2018influential reference
• NBER WORKING PAPER SERIES ACCOUNTING FOR FACTORLESS INCOME

  2018cited by this paper
• Employment Protection Deregulation and Labor Shares in Advanced Economies

  2018cited by this paper
• LABOR SUPPLY FACTORS AND ECONOMIC FLUCTUATIONS: LABOR SUPPLY FACTORS AND ECONOMIC FLUCTUATIONS

  2018cited by this paper
• Priors for the Long Run

  2018cited by this paper
• Inference Based on Structural Vector Autoregressions Identified With Sign and Zero Restrictions: Theory and Applications

  2018cited by this paper
• Corporate Tax Cuts and the Decline of the Labor Share

  2018cited by this paper
• Is Automation Labor Share-Displacing? Productivity Growth, Employment, and the Labor Share

  2018cited by this paper
• Declining Competition and Investment in the U.S.

  2017cited by this paper
• Political Distribution Risk and Aggregate Fluctuations

  2017cited by this paper
• The Race between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment

  2017cited by this paper
• The Fall of the Labor Share and the Rise of Superstar Firms*

  2017influential reference
• Rents, Technical Change, and Risk Premia

  2017cited by this paper
• Concentrating on the Fall of the Labor Share

  2017cited by this paper
• Productivity and Misallocation in General Equilibrium*

  2017cited by this paper
• Deciphering the Fall and Rise in the Net Capital Share: Accumulation or Scarcity?

  2016cited by this paper
• Prior Selection for Vector Autoregressions

  2015cited by this paper
• Capital in the Twenty-First Century

  2014cited by this paper
• The Global Decline of the Labor Share

  2014influential reference
• "Production, growth, and business cycles I: The basic neoclassical model," Journal of Monetary Economics 21(2), March 1988, pp. 195-232

  2013cited by this paper
• The Decline of the U.S. Labor Share

  2013influential reference
• Getting Normalization Right: Dealing with ‘Dimensional Constants’ in Macroeconomics

  2012cited by this paper
• Technology Shocks in a Two-Sector DSGE Model

  2012cited by this paper
• Business cycle measurement with some theory

  2011cited by this paper
• Sign Restrictions in Structural Vector Autoregressions: A Critical Review

  2011cited by this paper
• Identifying the Elasticity of Substitution with Biased Technical Change

  2010cited by this paper
• Shocking Stuff: Technology, Hours, and Factor Substitution

  2010cited by this paper
• Vector Autoregressions : Theory of Identification and Algorithms for Inference

  2007influential reference
• Shocks and Frictions in Us Business Cycles: A Bayesian DSGE Approach

  2007cited by this paper
• FEDERAL RESERVE BANK OF SAN FRANCISCO

  2006cited by this paper
• The Dynamic Effects of Neutral and Investment‐Specific Technology Shocks

  2006influential reference
• Measuring Labor’s Share of Income

  2005cited by this paper
• Explaining Movements in the Labor Share

  2003cited by this paper
• Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets

  2001cited by this paper
• Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania

  2000cited by this paper
• Bayesian methods for dynamic multivariate models

  1998cited by this paper
• The Medium Run

  1997cited by this paper
• Forecasting and Conditional Projection Using Realistic Prior Distributions

  1983cited by this paper
• Alternative CES Estimation Techniques

  1980cited by this paper
• Measurement of the Elasticity of Factor Substitution and Bias of Technical Change

  1978influential reference
• Nonlinear Estimation of the CES Production Parameters: A Monte Carlo Study

  1974cited by this paper

• The impact of Ukrainian immigration on labour market dynamics in Poland: A Bayesian VAR analysis

  2026cites this paper
• Outsourcing and the globalization of exploitation: declining labor shares in manufacturing global value chains

  2026cites this paper
• Explaining Deviations from Okun's Law

  2026cites this paper
• Income distribution effect of energy marketization reform: Evidence from Chinese enterprises and regions

  2026cites this paper
• Automation and Top Entrepreneurial Income Inequality

  2026cites this paper
• Does digital technology increase the labor income share of enterprises?

  2026cites this paper
• Can government procurement increase the labor share? Evidence from China

  2026cites this paper
• Capital composition and the decline of the labor share: Why buildings matter

  2026cites this paper
• Elasticity of Substitution, Technological Progress Bias and Labor Income Share: Evidence From China

  2025cites this paper
• Promotion or inhibition: the impact of corporate financialization on the labour income share in China

  2025cites this paper
• Voluntary environmental programs and corporate labor income share: Evidence from ISO14001 environmental standard certification.

  2025cites this paper
• Automation and the rise of superstar firms

  2025cites this paper
• Automation and asymmetric international spillovers of technological shocks

  2025cites this paper
• The Dark Side of Environmental Judicial Specialization: Corporate Labor Income Share in China

  2025cites this paper
• Institutional openness and the labor income share of enterprises - A decade and a half of empirical evidence from China's free trade zones

  2025cites this paper
• How a 50 percent decline in the cost of innovative capital reshapes labor share and prices

  2025cites this paper
• The Impact of Government Intervention in Rural Tourism Development on Residents’ Income: A Quasi-Natural Experiment from China

  2025cites this paper
• Changes in labor share of China: A micro-level anatomy

  2025cites this paper
• From wages to widgets: how minimum wage hikes fuel automation

  2025cites this paper
• AI innovation and the labor share in European regions

  2025cites this paper
• Unslicing the Pie: AI Innovation and the Labor Share in European Regions

  2024cites this paper
• Robots: How bad could it be globally?

  2024cites this paper
• The international dimension of trend inflation

  2024cites this paper
• Generative AI: Riding the new general purpose technology storm

  2024cites this paper
• R&D financing and production: A new Ricardian specific factor model

  2024cites this paper
• The effect of firm‐level economic policy uncertainty on labor share: Empirical evidence from China

  2024cites this paper
• The Implications of Routine‐Biased Technological Change on Hours Worked Fluctuations*

  2024cites this paper
• Broadband infrastructure expansion and labour income share: micro-evidence from Chinese industrial enterprises

  2024cites this paper
• Demographic change, secular stagnation, and inequality: automation as a blessing?

  2024cites this paper
• Firm entry, endogenous wage moderation, and labor market dynamics

  2024cites this paper
• The impact of monetary policy on a labor market with heterogeneous workers: The case of Chile

  2023cites this paper
• The Pasinetti theorem in a task‐based model of automation

  2023cites this paper
• There is power in general equilibrium

  2023cites this paper
• Does automation technology increase wage?

  2023cites this paper
• Lohnführerschaft in Österreich: Relikt der Vergangenheit oder sozialpartnerschaftlicher Dauerbrenner?

  2023cites this paper
• A Mixed Frequency BVAR for the Euro Area Labour Market*

  2023cites this paper
• The Impact of China's Pilot Carbon Ets on the Labor Income Share——Based on an Empirical Method of Combining Psm with Staggered Did

  2023cites this paper
• Inflation and income inequality in a Schumpeterian economy with heterogeneous wealth and skills

  2023cites this paper
• Digitalization generates equality? Enterprises’ digital transformation, financing constraints, and labor share in China

  2023cites this paper
• Capital-augmenting technical change in the context of untapped automation opportunities

  2023cites this paper
• Explaining the decline in the US labor share: taxation and automation

  2022cites this paper
• Impact of Energy-Biased Technological Progress on Inclusive Green Growth

  2022cites this paper
• Inefficient Automation

  2022cites this paper
• Do Trade Agreements Contribute to the Decline in Labor Share? Evidence from Latin American Countries

  2021cites this paper
• Capital-labor substitution elasticity: A simulated method of moments approach

  2021cites this paper
• Automation and sectoral reallocation

  2021cites this paper
• Business Cycle Implications of Firm Market Power in Labor and Product Markets

  2021cites this paper
• Striking a Bargain: Narrative Identification of Wage Bargaining Shocks

  2021cites this paper
• Replicating Business Cycles and Asset Returns with Sentiment and Low Risk Aversion

  2021cites this paper
• Market Power, Inequality, and Financial Instability

  2020influential citation
• From Secular Stagnation to Robocalypse? Implications of Demographic and Technological Changes

  2019cites this paper
• Explaining the Labor Share: Automation Vs Labor Market Institutions

  2019cites this paper
• Are Your Labor Shares Set in Beijing? The View Through the Lens of Global Value Chains

  2019cites this paper
• Firm Heterogeneity and the Aggregate Labour Share

  2019cites this paper
• Government Debt, Interest Rates, and Income Distribution

  year unknowncites this paper
• Explaining Deviations from Okun’s Law ∗

  year unknowninfluential citation
• Beyond Aggregates A Sector-Specific Framework for Long-Term Growth Modeling

  year unknowncites this paper
• Input specificity and labor’s bargaining power: A production tree approach to functional income distribution

  year unknowncites this paper
• M ACROECONOMIC E FFECTS OF THE G ENDER R EVOLUTION *

  year unknowncites this paper