Labor Share Decline and Intellectual Property Products Capital: A Different Measurement Perspective
28 Pages Posted: 22 Mar 2022 Last revised: 4 Apr 2022
Date Written: March 12, 2022
Koh et al. (2020, Econometrica) attribute the decline in the labor share over the last 90 years to the capitalization of intellectual property in the national income and product accounts. We document that these findings are limited to the Gross labor share; the Net labor share trend is unrelated to the capitalization of intellectual property. This distinction is important because Net labor share is a more direct measure of income distribution between labor and capital. In addition, over the past four decades, both Gross and Net labor shares for the corporate sector exhibit a declining trend irrespective of the accounting treatment of intellectual property. These findings extend to international settings. In sum, the capitalization of intellectual property has little effect on the inferences about the shift in income distribution between capital and labor.
Keywords: Gross Labor Share, Net Labor Share, Intellectual Property Products, NIPA Accounting, BEA Revisions, Capitalization, Expensing, Accounting for Intellectual Property
JEL Classification: E01, E22, E25
Suggested Citation: Suggested Citation