Why is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence

71 Pages Posted: 5 Sep 2017

See all articles by Mai Dao

Mai Dao

International Monetary Fund (IMF)

Mitali Das

International Monetary Fund (IMF)

Zsoka Koczan

International Monetary Fund (IMF)

Weicheng Lian

International Monetary Fund (IMF)

Date Written: July 2017

Abstract

This paper documents the downward trend in the labor share of global income since the early 1990s, as well as its heterogeneous evolution across countries, industries and worker skill groups, using a newly assembled dataset, and analyzes the drivers behind it. Technological progress, along with varying exposure to routine occupations, explains about half the overall decline in advanced economies, with a larger negative impact on middle-skilled workers. In emerging markets, the labor share evolution is explained predominantly by global integration, particularly the expansion of global value chains that contributed to raising the overall capital intensity in production.

Keywords: labor share, routinization, automation, global value chains, Aggregate Factor Income Distribution, Globalization: Labor, Technological Change: Choices and Consequences

JEL Classification: E25, F66, O33

Suggested Citation

Dao, Mai and Das, Mitali and Koczan, Zsoka and Lian, Weicheng, Why is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence (July 2017). IMF Working Paper No. 17/169. Available at SSRN: https://ssrn.com/abstract=3030759

Mai Dao (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mitali Das

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Zsoka Koczan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Weicheng Lian

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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