An influential strand of recent research has claimed that large governments in European countries explain their weaker long-term economic performance compared to the U.S. On the other hand, despite these alleged costs, large governments have been popular with electorates. This paper seeks to...

Has the labor share declined? And what is the impact of international trade? These questions are not only relevant in an international context they also matter for understanding the regional distribution of incomes in a given country. In this paper, we study two regions with trade exposures that...

The Cobb-Douglas production function is often used to analyse the supply-side performance and measurement of a country’s productive potential. This functional form, however, includes the assumption of a constant share of labor in output, which may be too restrictive for a converging country....

In this paper we study the evolution of the labor share in the OECD. We show it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or capital-augmenting technological progress; and that discrepancies between the...

This Selected Issues paper analyzes the challenge of population aging for Belgium. It argues that the aging strategy should be broadened to include more explicitly the objective of raising employment rates to foster potential growth. The paper discusses assumptions underlying the official aging...

This paper uses a dynamic economy model, with unionized labor markets, to analyze the effects of labor market reforms, similar to those recently introduced in Germany, on the domestic and trading partner economies. The model is calibrated on Germany and the rest of the Euro area. The results...

A labor matching model with nominal rigidities can match short-run movements in labor’s share with some success. However, it cannot explain much of the behavior of employment, vacancies, and job flows in postwar US data without resorting to additional shocks beyond monetary policy and...

This paper is the first to study the factors determining labor’s share of income on the level of the individual firm, employing an unusually informative panel data set. The empirical examination is concerned with Switzerland which stands out as one of the very few developed countries with a...

We consider a decentralized version of the neoclassical growth model where labor share is chosen by workers to maximize their long run (permanent) wages. In this framework, if the labor share increases relative to the competitive share, workers capture a larger share of a smaller total income in...