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
Authors: Guntram B. Wolff Bennet Berger

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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 is a Senior fellow at Bruegel. He is also a Professor of Public Policy and Economics at the Willy Brandt School of Public Policy. From 2022-2024, he was the Director and CEO of the German Council on Foreign Relations (DGAP) and from 2013-22 the director of Bruegel. Over his career, he has contributed to research on European political economy, climate policy, geoeconomics, macroeconomics and foreign affairs. His work was published in academic journals such as Nature, Science, Research Policy, Energy Policy, Climate Policy, Journal of European Public Policy, Journal of Banking and Finance. His co-authored book “The macroeconomics of decarbonization” is published in Cambridge University Press.

An experienced public adviser, he has been testifying twice a year since 2013 to the informal European finance ministers’ and central bank governors’ ECOFIN Council meeting on a large variety of topics. He also regularly testifies to the European Parliament, the Bundestag and speaks to corporate boards. In 2020, Business Insider ranked him one of the 28 most influential “power players” in Europe. 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 member and co-director to the G20 High level independent panel on pandemic prevention, preparedness and response under the co-chairs Tharman Shanmugaratnam, Lawrence H. Summers and Ngozi Okonjo-Iweala. From 2013-22, he was an advisor to the Mastercard Centre for Inclusive Growth. He is a member of the Bulgarian Council of Economic Analysis, the European Council on Foreign Affairs and advisory board of Elcano.

Guntram 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 worked in the research department at the Bundesbank, which he joined after completing his PhD in economics at the University of Bonn. He also worked as an external adviser to the International Monetary Fund. He is fluent in German, English, and French. His work is regularly published and cited in leading media.
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.