What Determines the Capital Share Over the Long Run of History?

44 Pages Posted: 14 May 2020

See all articles by Erik Bengtsson

Erik Bengtsson

Lund University

Enrico Rubolino

University of Lausanne

Daniel Waldenström

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 2 versions of this paper

Date Written: 2020

Abstract

This paper analyzes the determinants of the labor-capital split in national income for 20 countries since the late 1800s. Our main identification strategy focuses on unique historical quasi-experimental events: i) the introduction of universal suffrage, ii) close election wins of left-wing governments, iii) decolonization, iv) unionization shocks, and v) wars. We also run instrumented panel regressions. Our findings show that the capital share decreased in response to radical institu-tional and political shifts, such as the introduction of universal suffrage in the early 1900s, the undoing of colonialism and the implementation of redistributive policies during the post-war period. By contrast, the capital share increased following the erosion of trade unionism since the 1980s. Wars, despite destroying the capital stock, generated windfall profits that increased the capital share.

Keywords: inequality, factor shares, event study, economic history, institutions

JEL Classification: D330, E020, N000

Suggested Citation

Bengtsson, Erik and Rubolino, Enrico and Waldenström, Daniel, What Determines the Capital Share Over the Long Run of History? (2020). CESifo Working Paper No. 8281, Available at SSRN: https://ssrn.com/abstract=3598767 or http://dx.doi.org/10.2139/ssrn.3598767

Enrico Rubolino

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Daniel Waldenström

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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