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Free University of Bozen-Bolzano

LocationRoom BZ E4.23, Universitätsplatz 1 - Piazza Università, 1, 39100 Bozen-Bolzano

Departments Press and Events

16 Apr 2019 12:30-13:30

research seminar:“The labor share decline: new empirical evidence”

Francesco Furlanetto, Norges Bank

LocationRoom BZ E4.23, Universitätsplatz 1 - Piazza Università, 1, 39100 Bozen-Bolzano

Departments Press and Events

We estimate a structural vector autoregressive(SVAR) model in order

to quantify four of the main explanations forthe decline of the US labor income

share: (i) rising market power of firms, (ii)falling market power of workers, (iii)

higher investment specific technology growth,and (iv) the widespread emergence

of automation or robotization in productionprocesses. Identification is achieved

with theory robust sign restrictions imposed atmedium to long run horizons. The

restrictions are derived from a stylizedmacroeconomic model of structural change.

Across specifications we find that automationis the main driver of the long run labor

share. Firms’ rising markups can, however,account for a significant part of the

accelerating labor share decline observed inthe last 20 years. Our results also point

to complementarity between labor and capital,thus, ruling out capital deepening

as a major force behind declining labor shares.If anything we find the opposite:

investment specific technology growth has ledto a mild increase of the labor income

share in our sample.


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