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

Arbeitspapier

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).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IAB-Discussion Paper ; No. 28/2017

Classification and Topics

• Classification: Wirtschaft ; Institutions and the Macroeconomy ; Aggregate Factor Income Distribution ; Wages, Compensation, and Labor Costs: General ; Unemployment: Models, Duration, Incidence, and Job Search ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: labour share ; elasticity of substitution ; ICT ; search and matching ; job polarisation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Carbonero, Francesco ; Offermanns, Christian J. ; Weber, Enzo
• Event: Veröffentlichung
• (who): Institut für Arbeitsmarkt- und Berufsforschung (IAB)
• (where): Nürnberg
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/172892
• Last update: 10.03.2025, 11:42 AM CET