Dualism and payroll shares across US states

This paper analyses US payroll share and components across states for the period 1977-2017. Findings include that spatial clustering in payroll shares decreased until the year 2000. States are clustered in low and high productivity groups. We relate this phenomenon to dualism. High labour productivity states featured high payroll shares early on, but now feature low payroll shares. We label this phenomenon decoupling of labour productivity from real wages. A Divisia Decomposition documents that Rust Belt states dominated the decline in US payroll share in the 1980s, whereas more recently large (coastal) states dominated. While we do not explain (potentially different) mechanisms, decoupling is apparent throughout.