The recent recovery continued a trend that started in the mid-1970s of a growing divergence between capital and labor incomes. This trend appears to be largely due to a shift in the balance of corporate governance. A growing concentration of financial assets among institutional investors was juxtaposed by a declining unionization rate. Consequently, institutional investors had the incentives and increasingly the ability to allocate a growing share of corporate resources towards capital, particularly in the form of share repurchases and dividend payouts instead.
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