Declining Labor and Capital Shares

Citation: Simcha Barkai (2016) Declining Labor and Capital Shares.
Internet Archive Scholar (search for fulltext): Declining Labor and Capital Shares
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Summary

Shares of gross value added:

Share in/of	1984	2014
Labor	65.28	58.60
Capital (required return)	24.17	16.94
Profit	2.16	15.70
Indirect taxes	8.39	8.76

Previous research has not found decline in both labor and capital shares. This paper differs in that required return taken from prices rather than assumed.

Profit increase explained by increased industry concentration, even after excluding industries with tradeable goods (thus possibility increased foreign competition causes overestimate of increased concentration), R&D intensive industries (possibility that intangible capital inadequately accounted for), and industries in which tax-exempt entities play a large role.

Increase profit share has negative welfare impacts.

Model assumes homogeneous labor and capital, and labor and capital levels adjust to their long-term levels.

Theoretical and Practical Relevance

Compatible with different models of concentration (monopolistic competition, dominant firms), requires further research.

No concrete explanations of increased concentration offered.