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The alleged stability of the labour share of income in macroeconomic theories of income distribution

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  • Hagen Krämer

    (Karlsruhe University of Applied Sciences)

Abstract

The labour share of income in national product has shown a declining trend in many advanced economies over the past 30 years. However, many economists still hold the view that the wage share remains almost constant in the long run. The notion of the relative stability of the wage share in the long run is considers to be a stylized fact or even sometimes called a “law of economics”. This paper attempts to show how the alleged stability of the labour share of income became known as one of the “great magnitudes in economics”. It also shows how this “law” made its way into the three major theories of macroeconomic income distribution, i.e. neoclassical, post-Keynesian, and Kaleckian distribution theory. Since the data show strong fluctuation of aggregate income shares over the long run, the conclusion is reached that the major macroeconomic theories of growth and distribution are built around an invalid – or at least highly questionable – assumption about the real world.

Suggested Citation

  • Hagen Krämer, 2010. "The alleged stability of the labour share of income in macroeconomic theories of income distribution," IMK Working Paper 11-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:11-2010
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    References listed on IDEAS

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    1. Alain de Serres & Stefano Scarpetta & Christine de la Maisonneuve, 2002. "Sectoral Shifts in Europe and the United States: How They Affect Aggregate Labour Shares and the Properties of Wage Equations," OECD Economics Department Working Papers 326, OECD Publishing.
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    Cited by:

    1. Jean-François FAGNART & Marc GERMAIN & Alphonse MAGNUS, 2013. "Soutenabilité forte, rente et partage de la valeur ajoutée," LIDAM Discussion Papers IRES 2013021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Lawrence Robert Z., 2015. "Recent Declines in Labor's Share in U.S. Income: A Preliminary Neoclassical Account," Working Paper Series rwp15-034, Harvard University, John F. Kennedy School of Government.
    3. Saumik Paul & Yoko Oishi, 2018. "A Primer on the Drivers of Labor Income Share," Working Papers id:12948, eSocialSciences.

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