Discretionary monetary policy, quantitative easing and the decline in US labor share

Eric Olson, Andrew T. Young


Labor shares in the US and other OECD countries have been trending downward (OECD (2012); Elsby et al. (2013)). Piketty (2014) has argued that this may be an inevitability of capitalist economies. Others have argued that globalization may be a cause (Harrison (2005); Guscina (2006); Schneider (2011)). We explore the possibility that in the US discretionary monetary expansion has played a role. We estimate the relationship between monetary policy innovations and labor share based using VARs estimated separately for the 1986-2002 (rule-based), 2003-2014 (discretionary), and 2008Q3-2014 (quantitative easing). We report that positive monetary policy innovations are associated with statistically significant, persistent decreases in labor shares in the later (discretionary and quantitative easing) periods.

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DOI: https://doi.org/10.17811/ebl.4.2.2015.63-78


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