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The Long-Run Decline In Labor Share: Technology Versus Institutions, Mary O'Mahony, Michela Vecchi, Francesco Venturini

Francesco Venturini

We investigate the causes of the declining trend in labor shares using a large industry level data set and controlling for heterogeneity, non-stationarity and cross-sectional dependence. Our results show that in, the long run, technological changes and ICT capital are major sources of the decline. Conversely, knowledge capital increases labor shares, as well as more stringent regulations on intellectual property rights. Other market regulations do not play a significant role. Our results also show that hysteresis characterizes the dynamics of labor shares in all countries. This further supports the assumption that institutional differences do not cause labor share movements and …