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Structural Change and the Labor Share: Insights From Baumol and Lewis

Year: 2025

Type: article

Abstract: ABSTRACT This paper makes two contributions. First, it links a model of structural change and income distribution to a method of decomposing the aggregate labor share into sectoral contributions. Second, it formalizes the interaction between structural change and the labor share using Baumol (1967) and Lewis (1954). The premise is a shift of employment from progressive to stagnant sectors. We find that: stagnant sector labor share dominates distribution under Baumolian assumptions; and, only the Lewis model can deliver a decline in the aggregate labor share for an economy undergoing a reverse‐Lewis structural change along the lines of Taylor and Ömer (2019).

Source: Metroeconomica

DOI: 10.1111/meca.70004

Authors: Codrina Rada, Ansel Schiavone

Institutions: University of Utah, St. John's University

Language: English

Topic: Economic Theory and Policy

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,350