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  5. Labor Share, Markups, and Input-Output Linkages – Evidence from the U.S. National Accounts

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Labor Share, Markups, and Input-Output Linkages – Evidence from the U.S. National Accounts

  • Benjamin Bridgman
  • Berthold Herrendorf
American Economic Journal: Macroeconomics (Forthcoming)

Abstract

This paper investigates declining U.S. labor share by employing a multisector model that incorporates the input-output structure of the economy. Analyzing data from 1957 to 2016, we find that increasing markups account for the majority of the decline. Input-output linkages significantly amplified a modest increase in sectoral markups. Capital deepening had large direct effects in the goods sector but structural change offset this effect by reallocating output from the goods to the services sector. In contrast, markups increased in both sectors so structural change does not have an offsetting effect.

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