The Unassuming Economist

The IMF’s forthcoming World Economic Outlook will have a chapter on what drives the decline in the labor share of income in many countries around the world. Previewing the chapter (see figure above), IMF Managing Director Lagarde wrote that “trade and technological innovation have allowed countries to grow the economic pie and improve living standards, while lifting hundreds of millions of people out of poverty. Yet more could be done to mitigate the unwelcome side-effects seen in some places—including a rise in income inequality, job losses in shrinking sectors, and protracted economic and social problems across structurally weaker regions.”

For earlier work on inequality and the decline in labor share of income, see Krugman’s post for a summary, this F&D article for a longer description or this working paper for the gory details.