Bargaining power, structural change, and the falling US labor share

One of the most significant stylized facts in the U.S. economy since the 1970s has been the decline in the share of national income accruing to labor. Many recent studies have sought to explain this trend, with most explanations focusing on structural changes such as deindustrialization, globalization, financialization, rising market concentration, and technological change.

In this paper, the authors argue that these forces primarily operate through a bargaining power channel measured by the cost of job loss and that the reduction in labor’s share of income has been driven by lower bargaining power for workers. They examine various parameters for the US between 1960 and 2016 to test this hypothesis and conclude that structural changes such as globalization (Furceri and Loungani, 2018) and weak economic performance in the US have increased inequality over time.

Click here to read the full paper.

Posted by at 1:23 PM

Labels: Inclusive Growth


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