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Discussion Paper Details

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Title: Explaining Movements in the Labour Share

Author(s): Samuel Bentolila and Gilles Saint-Paul

Publication Date: September 1998

Keyword(s): capital-output ratio and labour share

Programme Area(s): Human Resources

Abstract: In this paper we study the evolution of the labour share in the OECD since 1970. We present a theoretical model showing that it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or the skill mix; and that discrepancies between the marginal product of labour and the real wage (due to, e.g. product market power, union bargaining, and labour adjustment costs) cause departures from it. We estimate the model with panel data on 15 industries and 14 countries for 1973-93 and derive the evolution of the wage gap in Germany and the United States.

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Bibliographic Reference

Bentolila, S and Saint-Paul, G. 1998. 'Explaining Movements in the Labour Share'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1958