Explaining movements in the labor share

  • Bentolila S
  • Saint-Paul G
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In this paper we study the evolution of the labor share in the OECD. We show it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or capital-augmenting technological progress; and that discrepancies between the marginal product of labor and the real wage due to, e.g., labor adjustment costs or union wage bargaining cause departures from it. We also provide empirical evidence on the determinants of the labor share with panel data on 13 industries and 12 countries for 1972-93. [PUBLICATION ABSTRACT]

Author-supplied keywords

  • Capital-output ratio
  • Labor share

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  • Samuel Bentolila

  • Gilles Saint-Paul

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