Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence

By Mai Dao, Mitali Das, Zsoka Koczan, Weicheng Lian

July 24, 2017

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Mai Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian. Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence, (USA: International Monetary Fund, 2017) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper documents the downward trend in the labor share of global income since the early 1990s, as well as its heterogeneous evolution across countries, industries and worker skill groups, using a newly assembled dataset, and analyzes the drivers behind it. Technological progress, along with varying exposure to routine occupations, explains about half the overall decline in advanced economies, with a larger negative impact on middle-skilled workers. In emerging markets, the labor share evolution is explained predominantly by global integration, particularly the expansion of global value chains that contributed to raising the overall capital intensity in production.

Subject: Emerging and frontier financial markets, Financial markets, Global value chains, Globalization, Labor, Labor share

Keywords: Advanced economy, Automation, Developing economy, Emerging and frontier financial markets, Global, Global value chains, Income share, Labor share, Labor share decline, Labor share dynamics, Low-labor-share sector, Routinization, Share of income, Shift-share analysis, WP

Publication Details

Pages:

70
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/169
Stock No:

WPIEA2017169
ISBN:

9781484311042
ISSN:

1018-5941

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