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Discretionary monetary policy, quantitative easing and the decline in US labor share

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  • Eric Olson
  • Andrew T. Young

Abstract

Labor shares in the US and other OECD countries have been trending downward (OECD (2012); Elsby et al. (2013)). Piketty (2014) has argued that this may be an inevitability of capitalist economies. Others have argued that globalization may be a cause (Harrison (2005); Guscina (2006); Schneider (2011)). We explore the possibility that in the US discretionary monetary expansion has played a role. We estimate the relationship between monetary policy innovations and labor share based using VARs estimated separately for the 1986-2002 ( rule-based ), 2003-2014 ( discretionary ), and 2008Q3-2014 ( quantitative easing ). We report that positive monetary policy innovations are associated with statistically significant, persistent decreases in labor shares in the later ( discretionary and quantitative easing ) periods.

Suggested Citation

  • Eric Olson & Andrew T. Young, 2015. "Discretionary monetary policy, quantitative easing and the decline in US labor share," Economics and Business Letters, Oviedo University Press, vol. 4(2), pages 63-78.
    • Handle: RePEc:ove:journl:aid:10728
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/10728
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    Cited by:

    1. John Meszaros & Eric Olson, 2020. "The effects of U.S. quantitative easing on South Africa," Review of Financial Economics, John Wiley & Sons, vol. 38(2), pages 321-331, April.
    2. Sima Siami Namini, 2022. "Quantitative Easing Policy and Income Inequality in the U.S. Economy: Evidence from a FAVAR Model," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(4), pages 759-779, December.

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