DP16857 Labor Share, Markups, and Input-Output Linkages - Evidence from the National Accounts
The literature has suggested many possible reasons for the recent decrease in the U.S. labor share. We build a multi-sector model with input-output linkages that allows us to identify the key driving forces. We find that the decrease in the U.S. labor share reflects both sectoral forces, which can be identified with micro or NIPA data, and aggregation effects, which can be identified only with NIPA data. Specifically, we find that the main force was an increase in sectoral markups, which input-output linkages importantly amplified.