The Labor Income Share in the U.S.

The purpose of this exercise is to get you to write a report about an interesting economic subject. The report is written for an audience of non-economists, yet intelligent and educated individuals. Think of the report as an NY Times’ article about rocket science that you read and found interesting. Obviously, you are not a rocket scientist, but I bet you were still able to make sense of it. Therefore, your objective will be to write a similar report about the labor income share in the US. Technically, you could write about the labor share for a country of your choice, but you will be on your own in terms of finding the data to construct the labor income share for that country.

Instructions:
I have posted an excel sheet on your Moodle page. The excel sheet contains data for several variables that you will need to compute the labor share: Sheet 1 contains the data, and sheet 2 has the description of the data. I have also posted two articles: one by Gomme and Rupert (2004) and the other by Krueger (1999). In these articles, the authors discuss how one might compute the labor income share. You should read the articles, then using the approaches suggested by the authors, compute the labor income share for the period. After you construct the labor income share using both approaches, plot them on the same figure, and then discuss what you observe in your report. Your report should contain the following: How did you compute the labor share? What kind of problems complicate the computation of the labor income share? Does the labor income share, computed through both approaches, appear to display any specific tendency such as an increase or a decrease? If so, why should we care if the labor share increases or decreases? What could be the reasons behind the increase or decrease? Feel free to refer to articles from well-established newspapers like the Wall street journal, the New York Times, and The Economists, just to name a few. However, Wikipedia, or an article written by “Prof. I can write whatever and post it on the internet” would not be a reliable source.

The report should be no longer than two pages. There is no restriction on the font size, 11 or 12 font size should be fine, but no more than that. There are many articles on your Moodle page, so feel free to use any of them as references.

Sample Solution

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