Payroll Share, Real Wage and Labor Productivity across US States

41 Pages Posted: 15 May 2020

See all articles by Ivan Mendieta-Muñoz

Ivan Mendieta-Muñoz

University of Utah - College of Social & Behavioral Sciences - Department of Economics

Codrina Rada

University of Utah - College of Social & Behavioral Sciences - Department of Economics

Ansel Schiavone

University of Utah

Rudiger von Arnim

University of Utah

Date Written: April 15, 2020

Abstract

This paper analyzes regional contributions to the US payroll share from 1977 to 2017 and the four major business cycles throughout this period. We implement two empirical exercises. First, we decompose the US payroll share across states. Utilizing a Divisia index decomposition technique yields exact contributions of real wages, employment structure, labor productivity and relative prices across the states to the aggregate change in the payroll share. Key findings are that the decline in the aggregate (i) is driven by decoupling between real wage and labor productivity; and (ii) is initially driven by the rust belt states, but subsequently dominated by relatively large states. Second, we employ mixture models on real wages and labor productivity across US states to discern whether distinct mechanisms appear to generate these distributions. Univariate models (iii) indicate the possibility that two distinct mechanisms generate state labor productivities, raising the question of whether regional dualism has taken hold. Lastly, we use bivariate mixture models to investigate whether such dualism and decoupling manifest in the joint distributions of payroll shares and labor productivity, too. Results (iv) are affirmative, and further suggest a tendency for high performing states to have relatively high payroll shares initially, and low payroll shares more recently.

Keywords: labor share; US states; Divisia decomposition; mixture models

JEL Classification: D33, C43, O41, O5

Suggested Citation

Mendieta-Muñoz, Ivan and Rada, Codrina and Schiavone, Ansel and von Arnim, Rudiger, Payroll Share, Real Wage and Labor Productivity across US States (April 15, 2020). Institute for New Economic Thinking Working Paper Series No. 121, Available at SSRN: https://ssrn.com/abstract=3593913

Ivan Mendieta-Muñoz (Contact Author)

University of Utah - College of Social & Behavioral Sciences - Department of Economics ( email )

1645 Central Campus Dr.
Salt Lake City, UT 84112
United States

Codrina Rada

University of Utah - College of Social & Behavioral Sciences - Department of Economics ( email )

1645 Central Campus Dr.
Salt Lake City, UT 84112
United States

Ansel Schiavone

University of Utah ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States

Rudiger Von Arnim

University of Utah

1645 E. Campus Center
Salt Lake City, UT 84112
United States

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