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Is the decline in labour’s share in the US driven by changes in technology and/or market power? An empirical analysis

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  • Robert Dixon
  • G. C. Lim

Abstract

In this paper, we provide a perspective on the explanations suggested for the decline in labour’s share in the Nonfinancial Corporations sector of US economy since 1947. The literature identifies two broad groups of explanations for marked variations in the labour share – drivers associated with production technology (e.g. increasing automation or factor augmentation) and drivers that reflect non-technology factors (e.g. increasing market power). We provide a theoretical and empirical framework to understand and estimate the contribution of technology and/or non-technology factors. The key findings are that there was a ‘decoupling’ of wage growth and productivity growth in the US Nonfinancial Corporations sector in the early 2000s, and that there is not a single explanation for the decline in labour’s share in that sector over the period 2001–2013. Changes in production technology and in market power have both contributed to the decline.

Suggested Citation

  • Robert Dixon & G. C. Lim, 2020. "Is the decline in labour’s share in the US driven by changes in technology and/or market power? An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 52(59), pages 6400-6415, December.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:59:p:6400-6415
    DOI: 10.1080/00036846.2020.1795072
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    Citations

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    Cited by:

    1. Jasmine Mondolo, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," DEM Working Papers 2021/17, Department of Economics and Management.
    2. Ugur, Mehmet, 2024. "Innovation, market power and the labour share: Evidence from OECD industries," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    3. M. Battisti & M. Del Gatto & A. F. Gravina & C. F. Parmeter, 2021. "Robots versus labor skills: a complementarity/substitutability analysis," Working Paper CRENoS 202104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. Mertens, Matthias, 2022. "Micro-mechanisms behind declining labor shares: Rising market power and changing modes of production," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    5. Walter Paternesi Meloni & Antonella Stirati, 2023. "The decoupling between labour compensation and productivity in high‐income countries: Why is the nexus broken?," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 425-463, June.
    6. Anatolijs Prohorovs & Julija Bistrova, 2022. "Labour Share Convergence in the European Union," Economies, MDPI, vol. 10(9), pages 1-21, August.
    7. Jasmine Mondolo, 2022. "Product and labour market imperfections in the Italian manufacturing sector: a firm-level analysis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 813-838, October.
    8. Mondolo, Jasmine, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," MPRA Paper 110172, University Library of Munich, Germany, revised 05 Oct 2021.
    9. Walter Paternesi Meloni & Antonella Stirati, 2021. "What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies," Working Papers PKWP2104, Post Keynesian Economics Society (PKES).
    10. Kerstin Hotte & Melline Somers & Angelos Theodorakopoulos, 2022. "Technology and jobs: A systematic literature review," Papers 2204.01296, arXiv.org.

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