Saturday, July 28, 2007
Global upward trend in profit share
The BIS has an interesting working paper #231 on The global upward trend in the profit share. The paper addresses the rising share of value added going to capital rather than labour, a trend which is in evidence since the mid-1980s. The authors claim that this is not a cyclical development (unless you take Kondratiev-cycles into consideration, which they do not), but a fundamental shift explained by faster technological obsolesence of capital goods. The implications of this assessment are far reaching, not least with regards to the sustainability of equity valuations.