Recent Declines in Labor’s Share of US Income

That is a new and important paper by Robert Z. Lawrence.  It is a little hard to excerpt, but the core messages are pretty simple:

1. Labor and capital are mostly complements.

2. The recent problems of labor are due to a lack of capital, not substitution of capital for labor.

If Lawrence is right — and he has plenty of data on his side — a lot of what you read about these topics is wrong, at least circa the status quo.  And the idea that we need stiffer taxes on capital income could be disastrously off base.  This paper is interesting throughout, yet I predict it will be largely ignored for its inconvenient nature.

For the pointer I thank Robin Hanson.


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