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Labour Losing to Capital: What Explains the Declining Labour Share?

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During the past three decades, the share of national income represented by wages, salaries and benefits ‐¬†the labour share¬†‐ has declined in nearly all OECD countries. The chapter examines the drivers of this decline, stressing the role played by factors such as increased productivity and capital‐deepening, increased domestic and international competition, the reduction of workers' bargaining power and the evolution of collective bargaining institutions. The decline of the labour share went hand‐in‐hand with greater inequality in the distribution of market income, which might endanger social cohesion and slow down the current recovery. Enhanced investment in education and use of the tax and transfer system can effectively reduce these risks.

Document Type: Review Article

Publication date: 2012-07-01

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