The fall of the labour income share: the role of technological change and imperfect labour markets

Abstract

"The non-constancy of factor shares is drawing the attention of many researchers. We document an average drop of the labour share of 8 percentage points for eight European countries and the US between 1980 and 2007. We investigate theoretically and empirically two mechanisms: the substitution between Information Communication Technology (ICT) and labour and the presence of hiring costs. We find that the ICT-labour replacement is a promising channel to explain the decline of the labour share, though labour market frictions takes part of its explanatory power over. In particular, hiring costs have a bigger role in Europe than in the US. Finally, by modelling the elasticity of substitution between ICT and labour as a function of institutional and structural variables, we find that it correlates with the share of routine occupations (positively) and with the share of high-skill workers (negatively)." (Author's abstract, IAB-Doku) ((en))

Cite article

Carbonero, F., Offermanns, C. & Weber, E. (2017): The fall of the labour income share: the role of technological change and imperfect labour markets. (IAB-Discussion Paper 28/2017), Nürnberg, 26 p.