Policy brief

The global decline in the labour income share: is capital the answer to Germany’s current account surplus?

Analysing the major divergences between the three largest euro-area countries in terms of unit labour costs and current accounts, to the broader debat

Publishing date
26 April 2017

This paper links the major divergences between the three largest euro-area countries in terms of unit labour costs and current accounts, to the broader debate on labour income shares. The authors show that Germany, like the United States and Japan, has experienced a significant decline in the share of national income that goes to labour. At the same time, labour shares in France and Italy have increased since the beginning of monetary union, breaking a trend that had persisted for several decades. The capital intensity of production has increased much more significantly in France and Italy, while in Germany the capital-to-GDP ratio has stagnated and the net public capital stock has fallen. Our data suggests that capital and labour have been complements.

About the authors

  • Guntram B. Wolff

    Guntram Wolff was the Director of Bruegel. Over his career, he has contributed to research on European political economy and governance, fiscal, monetary and financial policy, climate change and geoeconomics. Under his leadership, Bruegel has been regularly ranked among the top global think tanks and has grown in influence and impact with a team of now almost 40 recognized scholars and around 65 total staff. Bruegel is also recognized for its outstanding transparency.

    A recognized thought leader and academic, he regularly testifies at the European Finance Ministers' ECOFIN meeting, the European Parliament, the German Parliament (Bundestag) and the French Parliament (Assemblée Nationale). From 2012-16, he was a member of the French prime minister's Conseil d'Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed to the G20 high level independent panel on pandemic prevention, preparedness and response. He is also a professor (part-time) at the Solvay Brussels School of Université Libre de Bruxelles, where he teaches economics of European integration.

    He joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he was coordinating the research team on fiscal policy at Deutsche Bundesbank. He also worked as an external adviser to the International Monetary Fund.

    He holds a PhD in economics from the University of Bonn and studied in Bonn, Toulouse, Pittsburgh and Passau. He taught economics at the University of Pittsburgh and at Université libre de Bruxelles. He has published numerous papers in leading academic journals. His columns and policy work are published and cited in leading international media and policy outlets. Guntram is fluent in German, English, French and has good notions of Bulgarian and Spanish.

  • Bennet Berger

    Bennet Berger, a German and US-American citizen, worked at Bruegel as a Research Assistant in the area of Global and European Macroeconomics. Before joining Bruegel, Bennet worked as a Research Assistant at the ifo Institute in Munich, the Ludwig Maximilians University of Munich (LMU), and the National Bureau of Economic Research. He also interned at the Federal Reserve Bank of Chicago.

    He holds a BSc in Economics from LMU and a Master in Economics and Finance from the Barcelona Graduate School of Economics (Universitat Pompeu Fabra). The subject of his undergraduate dissertation was an econometric analysis of global cycles in credit market access by developing countries. His master thesis was about tail measures of systemic risk and their predictive power for real economic downturns.

    Bennet’s research interests include Macroeconomics, Financial Crises, Sovereign Debt, and Monetary Policy.

    He is fluent in German and English, and has basic knowledge of Spanish.

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