Technology and the labour share in industrialised economies: an analysis at the aggregate and by skill level

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. The paper assesses the decline in the labour share in the aggregate and by skill level. We show that among the leading drivers of the declining labour share, the capital prices are the more consistent factor, led by the effects on the labour share of low-skilled workers. Our paper differs from previous existing research by dealing with endogeneity issues and controlling for variables related to financial and trade globalisation, ageing and labour market institutions. We also test the accumulation of capital in ICT technology, software and databases and the capital intensity; the first two variables result in leading factors explaining the labour share by skill levels.