Abstract: | This paper examines the effects of unemployment on the relative incomeshares of labor and capital in the post-World War II U.S. economy. In our econometric model, the "reserve army" effect of unemployment is mediated by the "inertia" effect of prevailing bargaining norms. Estimates of this model indicate: (1) the presence of a significant reserve army effect through the mid-1960s, a diminished effect in the late 1960s and 1970s, and a restored effect in the 1980s; and (2) a significant decline in the inertia effect of bargaining norms in the 1980s. |