Rising capital-labor substitution driving decline in labor shares in developed countries.
The article explores why labor shares are decreasing in developed countries by studying how easily capital and labor can be swapped in the economy. By looking at a model with two sectors and a focus on the service industry, the researchers found that factors like how easily technology can substitute for labor and how different sectors use resources affect how easily capital and labor can be switched. Their analysis shows that these factors can increase the overall ease of substituting capital for labor in the economy.