The decline in labor share has been concomitant with increases in income inequality the report notes a trend which can fuel social tension and harm economic growth the paper understanding the downward trend in labor income shares will be a chapter in the imfs flagship world economic outlook report to be released . The labor share of most advanced economies has declined since the 1980s and this decline has been associated with an increase in income inequality this post finds that indeed inequality increased more in advanced economies that experienced a larger decline in the labor share 1 measuring labor share. Uence the within labor income inequality the within capital income inequality and the correlation between agents labor and capital income which allows us to to analyze the joint behavior of labor share and inequality for example we consider a decline in the relative price of it capital which is more com. Labor income has been declining as a share of total income earned in the united states for the past three decades we look at the past effect of the labor share decline on income inequality and we study the likely future path of the labor share and its implications for inequality. Chart of the week inequality and the decline in labor share of income by imfblog as discussed in the imfs g20 note and a blog last week by imf managing director christine lagarde a forthcoming chapter of the world economic outlook seeks to understand the decline in the labor share of income that is the share of national income paid in
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