Aging and labor share of income in Korea

Abstract

A growing body of evidence points to a decline in the labor share of income. A sizable empirical literature delves into the relationship between technological progress, globalization, and market concentration and labor's declining income share, which can exacerbate income inequality. Population aging has often been put forth as a factor that worsens income inequality. However, few studies have empirically examined the nexus between aging and the labor share, a potentially significant driver of inequality. In this study, we use industry-level data to investigate the nexus in Korea, a rapidly aging country where inequality has emerged as a big social and economic issue. We find a positive and significant association between aging and labor share. Hence, at least in Korea, we do not find that aging exacerbates income inequality by reducing labor's income share. In addition, our evidence suggests that labor share has a negative link with both information and communication technology capital and robots.