Falling labor share does not mean capital share increased

What is it about?

I show that labor share has not fallen as much as previously thought if we remove capital depreciation. The capital stock has more types of equipment that need to be replaced more frequently, like computers. Payments to capital owners have increased to cover these additional costs.

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Why is it important?

Labor share has a central role in many of the recent controversies about income inequality. I show that there is not a strong, stable relationship between inequality and labor share. This finding is evidence that the recent increase in income inequality is not due to increasing returns to capital owners.