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Working Paper
The Shift to Remote Work Lessens Wage-Growth Pressures
Barrero, Jose Maria; Bloom, Nicholas; Davis, Steven J.; Meyer, Brent; Mihaylov, Emil (2022-07-08)
The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of US employers, and we develop novel survey data to quantify its force. Our data imply a cumulative wage-growth moderation of 2.0 percentage points over two years. This moderation offsets more than half the real-wage catchup effect that Blanchard (2022) highlights in his analysis of near-term inflation pressures. The amenity-values gains ...
FRB Atlanta Working Paper , Paper 2022-7

Working Paper
Corporate Tax Cuts and the Decline of the Manufacturing Labor Share
Kaymak, Barış; Schott, Immo (2023-08-30)
We document a strong empirical connection between corporate taxation and the manufacturing labor share, both in the US and across OECD countries. Our estimates associate 30 percent to 60 percent of the observed decline in labor shares with the fall in corporate taxation. Using an equilibrium model of an industry where firms differ in their capital intensities, we show that lower corporate tax rates reduce the labor share by raising the market share of capital-intensive firms. The tax elasticity of the labor share depends on the joint distribution of labor intensities and value added at the ...
International Finance Discussion Papers , Paper 1379

Working Paper
Endogenous Bargaining Power and Declining Labor Compensation Share
Córdoba, Juan C.; Isojärvi, Anni T.; Li, Haoran (2024-05-29)
We document that the protracted decline in the labor share has been accompanied by a decline in the tightness rate defined as the number of vacancies per job seekers. We argue that these two trends are related. When vacancies and job seekers are complements in the matching process, a decline in the tightness rate reduces workers’ fundamental bargaining power as defined by Hosios (1990), which in turn reduces the labor share of income. We calibrate a search and matching model extended to allow for an endogenous determination of bargaining power. The model can rationalize the common trends in ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 092

Working Paper
Corporate tax cuts and the decline of the manufacturing labor share
Kaymak, Barış; Schott, Immo (2022-12-20)
We document a strong empirical connection between corporate taxation and the manufacturing labor share, both in the US and across OECD countries. Our estimates associate 30 percent to 60 percent of the observed decline in labor shares with the fall in corporate taxation. Using an equilibrium model of an industry where firms differ in their capital intensities, we show that lower corporate tax rates reduce the labor share by raising the market share of capital-intensive firms. The tax elasticity of the labor share depends on the joint distribution of labor intensities and value added at the ...
Working Papers , Paper 22-39

Working Paper
The Future of Labor: Automation and the Labor Share in the Second Machine Age
Giri, Rahul; Taschereau-Dumouchel, Mathieu; Xia, Junjie; Drozd, Lukasz A.; Cheng, Hong (2021-03-09)
We study the effect of modern automation on firm-level labor shares using a 2018 survey of 1,618 manufacturing firms in China. We exploit geographic and industry variation built into the design of subsidies for automation paid under a vast government industrialization program, “Made In China 2025,” to construct an instrument for automation investment. We use a canonical CES framework of automation and develop a novel methodology to structurally estimate the elasticity of substitution between labor and automation capital among automating firms, which for our preferred specification is 3.8. ...
Working Papers , Paper 20-11

Working Paper
Revisiting Capital-Skill Complementarity, Inequality, and Labor Share
Orak, Musa; Shen, Shihan; Ohanian, Lee E. (2021-05-19)
This paper revisits capital-skill complementarity and inequality, as in Krusell, Ohanian, Rios-Rull and Violante (KORV, 2000). Using their methodology, we study how well the KORV model accounts for more recent data, including the large changes in the labor's share of income that were not present in KORV. We study both labor share of gross income (as in KORV), and income net of depreciation. We also use nonfarm business sector output as an alternative measure of production to real GDP. We find strong evidence for continued capital-skill complementarity in the most recent data, and we also find ...
International Finance Discussion Papers , Paper 1319

Working Paper
The Global Rise of Corporate Saving
Karabarbounis, Loukas; Chen, Peter; Neiman, Brent (2017-01-24)
The sectoral composition of global saving changed dramatically during the last three decades. Whereas in the early 1980s most of global investment was funded by household saving, nowadays nearly two-thirds of global investment is funded by corporate saving. This shift in the sectoral composition of saving was not accompanied by changes in the sectoral composition of investment, implying an improvement in the corporate net lending position. We characterize the behavior of corporate saving using both national income accounts and firm-level data and clarify its relationship with the global ...
Working Papers , Paper 736

Working Paper
What Can We Learn from Idiosyncratic Wage Changes?
Doniger, Cynthia L. (2021-08-12)
I document six facts about wage changes. First, most pay revisions occur at yearly frequency, but a small proportion occur at idiosyncratic times. Second, idiosyncratic pay changes are larger and more dispersed than year-end pay changes and resemble more pay changes occurring at job-to-job transitions. Third, idiosyncratic pay changes are more common for workers with less experience and, forth, in firms higher on the job-ladder. Fifth, industries in which the incidence of idiosyncratic raises have risen have experienced greater declines in labor share. Sixth, industries in which more firms ...
Finance and Economics Discussion Series , Paper 2021-055

Journal Article
Why Is the Labor Share Declining?
Shin, Yongseok; Aum, Sangmin (2020-10-22)
The fraction of national income accruing to labor (the labor share) had been roughly constant in developed economies for much of the 20th century but has fallen since the 1980s. We review several of the leading explanations in the literature for the declining labor share. We then point to hitherto unexplored dimensions of the data and provide suggestive evidence for a new explanation. In particular, we show that the labor share began a steeper descent in 2000. This more recent break in the labor-share trend coincides with the rapid rise of software investment, which has left a larger impact ...
Review , Volume 102 , Issue 4 , Pages 413-428

Working Paper
Payments on Digital Platforms: Resiliency, Interoperability and Welfare
Chiu, Jonathan; Wong, Russell (2021-02-17)
Digital platforms, such as Alibaba and Amazon, operate an online marketplace to facilitate transactions. This paper studies a platform’s business model choice between accepting cash and issuing tokens, as well as the implications for welfare, resiliency, and interoperability. A cash platform free rides on the existing payment infrastructure and proﬁts from collecting transaction fees. A token platform earns seigniorage, albeit bearing the costs of setting up the system and holding reserves to mitigate the cyber risk. Tokens earn consumers a return, insulating transactions from the ...
Working Paper , Paper 21-04

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