Explaining Movements in the Labor Share

Bentolila, Samuel; Saint-Paul, Gilles

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Explaining Movements in the Labor Share

CEPR Discussion Paper Series No. 1958

Posted: 10 Mar 1999

See all articles by Samuel Bentolila

Samuel Bentolila

Centro de Estudios Monetarios y Financieros (CEMFI); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Gilles Saint-Paul

University of Toulouse I - GREMAQ-IDEI; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: September 1998

Abstract

In this paper we study the evolution of the labor share in the OECD since 1970. We present a theoretical model showing that it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or the skill mix; and that discrepancies between the marginal product of labor and the real wage (due to, e.g., product market power, union bargaining, and labor adjustment costs) cause departures from it. We estimate the model with panel data on 15 industries and 14 countries for 1973-93 and derive the evolution of the wage gap in Germany and the United States.

JEL Classification: E25, J30

Suggested Citation: Suggested Citation

Bentolila, Samuel and Saint-Paul, Gilles, Explaining Movements in the Labor Share (September 1998). CEPR Discussion Paper Series No. 1958, Available at SSRN: https://ssrn.com/abstract=139315