Robert Z. Lawrence — Explaining recent declines in labour’s share in US income

The US debate over income inequality in the 1980s and 1990s focused on the growing disparity between the earnings of the skilled, the unskilled and the super-rich. After the global crash, the decline in labour’s share of national income has been added to these concerns. This column presents an alternative explanation for this decline, arguing that limited substitution possibilities between capital and labour combined with the acceleration in the pace of labour-augmenting technical change raises the effective labour-capital ratio. The policy implications of this alternative explanation are profoundly different from those currently circulating.

VOXEU
Explaining recent declines in labour’s share in US income
Robert Z. Lawrence | Professor of International Trade and Investment, John F Kennedy School of Government Harvard University, Senior Fellow, Peter G. Peterson Institute for International Economics, and a former member of of the President’s Council of Economic Advisors under President Clinton

ht Lambert Strether at Naked Capitalism