Explaining the decline in the US labor share: taxation and automation
- This study provides evidence for the USA that the secular decline in the labor share is not only explained by technical change or globalization, but also by the dynamics of factor taxation, automation capital (robots), and population growth. First, we empirically find indications of co-integration for the period from the last quarter of the 20th to the first decade of the twenty-first century. Permanent effects on factor shares emanate from relative factor taxation. The latter also have a lasting effect on the use of robots. Variance decompositions reveal that taxing contributes to changes in the two income shares and in automation capital. Second, we analyze and calibrate a neoclassical growth model extended to include factor taxation, automation capital, and capital adjustment costs. Labor and automation capital are perfect substitutes, whereas labor and traditional capital are complements. The model replicates the dynamics of the observed functional income distribution in the USAThis study provides evidence for the USA that the secular decline in the labor share is not only explained by technical change or globalization, but also by the dynamics of factor taxation, automation capital (robots), and population growth. First, we empirically find indications of co-integration for the period from the last quarter of the 20th to the first decade of the twenty-first century. Permanent effects on factor shares emanate from relative factor taxation. The latter also have a lasting effect on the use of robots. Variance decompositions reveal that taxing contributes to changes in the two income shares and in automation capital. Second, we analyze and calibrate a neoclassical growth model extended to include factor taxation, automation capital, and capital adjustment costs. Labor and automation capital are perfect substitutes, whereas labor and traditional capital are complements. The model replicates the dynamics of the observed functional income distribution in the USA during the 1965–2015 period. Counterfactual experiments suggest that the fall in the labor share would have been significantly smaller if labor and capital income tax rates had remained at their respective level of the 1960s.…
Author: | Burkhard HeerGND, Andreas Irmen, Bernd Süssmuth |
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URN: | urn:nbn:de:bvb:384-opus4-987613 |
Frontdoor URL | https://opus.bibliothek.uni-augsburg.de/opus4/98761 |
ISSN: | 0927-5940OPAC |
ISSN: | 1573-6970OPAC |
Parent Title (English): | International Tax and Public Finance |
Publisher: | Springer Science and Business Media LLC |
Place of publication: | Berlin |
Type: | Article |
Language: | English |
Year of first Publication: | 2023 |
Publishing Institution: | Universität Augsburg |
Release Date: | 2022/10/20 |
Tag: | Economics and Econometrics; Finance; Accounting |
Volume: | 30 |
First Page: | 1481 |
Last Page: | 1528 |
DOI: | https://doi.org/10.1007/s10797-022-09755-9 |
Institutes: | Wirtschaftswissenschaftliche Fakultät |
Wirtschaftswissenschaftliche Fakultät / Institut für Volkswirtschaftslehre | |
Wirtschaftswissenschaftliche Fakultät / Institut für Volkswirtschaftslehre / Lehrstuhl für Finanzwissenschaft | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | CC-BY 4.0: Creative Commons: Namensnennung (mit Print on Demand) |