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Labor Share Dynamics: A Survey Of The Theory

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Executive Summary

Labor share dynamics has been viewed as a minor concern in the years before the actual crisis. Despite in many European countries income distribution was increasingly favouring capital, this fact got little attention since in the neoclassical view factor share stability was considered, quoting Bentolila and Saint-Paul (2003) "As a granted stylized fact of growth". The wake and upsurge of the current global crisis has brought back to the front stage the need for a fine tuning of the demand level. In this context monetary policy proved to be ineffective after years of primacy over fiscal policy and of interest rate downhill run pursued to fight previous recessions.

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