[lbo-talk] question for DanDav - or anyone else?

Seth Ackerman seth_ackerman at comcast.net
Fri May 13 15:36:33 PDT 2005


Sorry if this question format is getting old....

What's up with the declining labor share of GDP in the US? It's fallen by about 3% of GDP since its last peak. It seems like economics doesn't have much to say about labor shares - maybe I'm wrong. The Cobb-Douglass production function, if memory serves, just assumes constant labor and capital shares, abstracting from several decades of relatively stable data. We have great-liberal-hope Sen. Paul Douglass (D- Ill.) to thank for that.

An aside: In Newt Gingrich's old district (that's "constituency" in American) one can request mental health services from the Cobb-Douglas county community services board. Can't say if this is just a coincidence.

Anyway, 3% of GDP isn't nothing. My back of the envelope calculations - $11 trillion GDP x 3% divided by 100mil US workers - indicates this has cost the average US worker $3300 a year. I wouldn't send back that kind of money.

So what does economic theory have to say about the causes of rising or falling labor/capital shares of national income?

Seth



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