On Labour Shares in Recent Decades: A Survey
| RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI - 2010 - 3
We survey the rich literature studying the behaviour of labor shares in recent decades. To explain
their dynamics – the main feature being the decline of European and American shares starting
in the 1980s – such literature considers models that use either neoclassical or Leontief-type production
functions, with both perfectly competitive markets and monopolistic competition coupled with
bargaining between firms and workers. These empirical studies in general have produced results that
are not very robust. However, they suggest that technical change has a negative and significant impact
on the labor share. Evidence for a negative effect of globalization variables is clearly revealed
for developing countries, whilst for advanced countries, this effect finds less support. Also, they
show that product and labor market regulation issues have mixed effects on the labor share. An alternative
to the econometric explanation of labor share is given in the final section.
Key words: Factor shares, functional income distribution.
JEL Classification: E24, E25.