The Decline of the Labor Share: New Empirical Evidence

We use time series techniques to estimate the importance of four main explanations for decline US labor income share: rising firm markups, falling bargaining power workers, higher investment-specific technology growth, and more automated production processes. Identification is achieved with restrictions derived from a stylized model structural change. Our results point automation as driver share, although markups have played an important role in last 20 years. also find evidence capital-labor complementarity, suggesting that capital deepening may raised share. (JEL D21, D43, E25, J51, L23, O33, O41)