Effects of manufacturing input servitization on labor income share and income distribution

Manufacturing input servitization—integrating services into traditional manufacturing inputs—has unclear implications for labor income distribution. This study examines how manufacturing input servitization (MIS) affects labor income share (LIS) and income distribution using multinational multi-industry panel data and regression analysis. The paper identifies positive and robust associations between MIS and LIS and uncovers mediating roles of labor productivity and human capital. Heterogeneity analysis shows the largest gains in medium-technology industries, followed by high- and low-technology sectors, and stronger impacts in developing than developed economies. An extended analysis links higher LIS in manufacturing to reduced income inequality. The results suggest that promoting servitization can enhance labor income and contribute to inclusive growth.