One of the Things We Know that Ain't so: Is U.S. Labor's Share Relatively Stable?

34 Pages Posted: 19 Jan 2005

See all articles by Andrew T. Young

Andrew T. Young

Texas Tech University - Rawls College of Business

Date Written: April 27, 2006

Abstract

Robert Solow (1958) argued that, from 1929-1954, U.S. aggregate labor's share was not stable relative to what we would expect given individual industry labor's shares. I confirm and extend this result using data from 1958-1996 that includes 35 industries (roughly 2-digit SIC level) and spans the entire U.S. economy. Changes in industry shares in total value-added contribute negligibly to aggregate labor's share volatility. Industry labor's shares comovement actually adds to aggregate labor's share volatility. These findings highlight economists' imprecise understanding of one of the stylized facts of economic growth. If the great macroeconomic ratio is meaningful, it must be interpreted in terms of long-run, offsetting shifts in "services" industries versus "goods" industries, both in terms of their labor's shares and shares in total value-added.

Keywords: Labor's share, factor shares, income distribution, great ratio, balanced growth, economic growth, unbalanced growth

JEL Classification: E23, E25, O10, O11, O30, O47

Suggested Citation

Young, Andrew T., One of the Things We Know that Ain't so: Is U.S. Labor's Share Relatively Stable? (April 27, 2006). Available at SSRN: https://ssrn.com/abstract=650783 or http://dx.doi.org/10.2139/ssrn.650783

Andrew T. Young (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
380
Abstract Views
2,189
rank
100,483
PlumX Metrics