Technology and the Labour Share in Industrialised Economies: A Revisited Analysis

Abstract

This paper revisits the discussion of the determinants of the declining labour share in industrialised countries. We select a panel of 20 OECD countries with the most advanced industrial capabilities and explore the effects of technological progress on the labour income share. We incorporate a full range of variables to cover the fundamental determinants. Our analysis extends previous studies by examining various proxies for technology which are significant drivers of the labour share. The paper expands the assessment by testing the labour share by skill level and shows that among the leading drivers of the declining labour share are the capital prices and ICT capital, driven by the effect of these variables on the labour share of low-skilled workers. Capital intensity, financial integration and trade globalisation shrink the aggregate labour share.