Research Programs: Special Projects

Historical Evaluation of Industrial Policy

Project Leader/Sub-Leader

OKAZAKI Tetsuji

OKAZAKI Tetsuji (Faculty Fellow)

Leader

Overview

It is widely accepted that productivity growth is essential for sustainable economic growth under declining population and labor force. Meanwhile, it is well documented that in advanced countries there has been discrepancy between productivity growth and wage increase and that labor share has been declining in recent decades. Given that productivity growth is a policy target of top priority, it is important to understand the relationship between productivity growth, wage increase, and labor share.

Decline in the labor share has been attracting the interest of economists, and a number of articles have investigated this issue. For instance, Autor, Dorn, Katz, Patterson, and Van Reenen (QJE 2020) analyze the micro data from the U.S. economic census to conclude that globalization and new technologies concentrate production to "superstar firms" with high markups and low labor share, which results in a fall of labor share at the macro-level. On the other hand, Kehrig and Vincent (QJE 2021) analyze micro data of the U.S. manufacturing sector and find a dramatic reallocation of value added toward plants with higher labor productivity and low labor share of income which, in turn, tend to grow faster.

This project intends to use a different approach to understand the decline in labor share. That is, unlike the extant literature, we directly observe the introduction and diffusion of the equipment necessary for launching a new technology, and based on the information, we precisely identify the impact of a technology on labor share.

November 15, 2021 - April 30, 2024

(During the research project period, the research activity period is set from November 15, 2021 to October 31, 2023, and the data usage reporting period is set from November 1, 2023 to April 30, 2024.)