The Missing Reallocation Effect? Decomposing the Declining Labour Share
-
Series
-
Speaker
-
LocationErasmus University Rotterdam, E building, Kitchen/Lounge E1
Rotterdam -
Date and time
November 02, 2023
12:00 - 13:00
Abstract: Since the mid-1980s the US labour share declined considerably and the economy reallocated towards sectors with high labour shares, mainly in services. Previous studies claim reallocation towards these sectors has not affected the overall labour share, so aggregate movements should be understood solely as a within-sector phenomenon. By exploiting a decomposition method that accounts for co-movements in sectoral labour shares and reallocation, I recover a positive effect: reallocation mitigates the decline in the labour share. The finding has measurement and welfare implications for the causes of the shifting distribution of income.