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[CANCELLED] Seminar: Does Capital-Labor Substitution or Do Institutions Explain Declining Labor Shares?

Speaker: Daniel Berkowitz

Daniel Berkowitz is a Professor of Economics at University of Pittsburgh. He is a co-managing editor of the Journal of Comparative Economics.

Abstract: Labor shares have been declining around the world since the 1980s and there are several explanations for this. Karabarbounis and Neiman (2014) highlight the role of a structural parameter in production functions (the "capital-labor substitution elasticity") that enables Örms to robustly replace labor with capital as the price of capital falls. However, Acemoglu and Robinson (2015) argue that political factors shaping the evolution of institutions can be more important than production functions. This paper takes advantage of labor market reforms and product market de-regulation in order to quantify institutional changes and recent estimates of sectoral production functions in China and rental-wage rental rates implied by Örm-level capitallabor ratios in order to quantify the capital-labor substitution channel. These data are used to decompose the contributions of the changes in institutions and capital-labor substitution to the decline laborís share in China during 1998-2007. The paper Önds that institutional changes in labor and product markets play a signiÖcantly more important role. Our Önding labor shares fall in China because of the success of the private sector and the concentration of high markup Örms that pay low labor shares mirrors Autor et alís (2017) Önding that the emergence of "superstar Örms that are large, have high markups and pay low labor shares drive declining labor shares in the United States.  


Location: 498 Uris Hall 


  • IO Seminar Series

  • Cornell Institute for China Economic Research (CICER)