Explaining Movements in the Labor Share

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Abstract
In this paper we study the evolution of the labor share in the OECD. We show it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or capital-augmenting technological progress; and that discrepancies between the marginal product of labor and the real wage ---due to, e.g., labor adjustment costs or union wage bargaining--- cause departures from it. We also provide empirical evidence on the determinants of the labor share with panel data on 13 industries and 12 countries for 1972-93.

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