Discretionary monetary policy, quantitative easing and the decline in US labor share
DOI:
https://doi.org/10.17811/ebl.4.2.2015.63-78Abstract
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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