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Since the early 1980s, there has been a broad, worldwide decrease in the share of income accruing to labour. We argue that this trend could be driven by recent trends in firm ownership. Using national accounts data, we first document the decline in the labour share since the 1980s in both Europe and the United States. This trend is common to most sectors of the economy, and is robust when accounting for the income of the self-employed. We show that this decline was mirrored by an increase in the share of payouts (dividends and buybacks) to shareholders. We provide evidence that countries with a larger share of non-financial corporations owned by institutional investors are countries with the largest share of payouts in gross value added. We use institutional ownership as an instrumental variable for payouts. We show that more institutional ownership leads to higher payouts and to a lower labour share. Overall, recent trends in firm ownership could explain half of the decline in the labour share in Europe and the United States.
