Working Paper: CEPR ID: DP12342
Authors: Gene Grossman; Elhanan Helpman; Ezra Oberfield; Thomas Sampson
Abstract: We explore the possibility that a global productivity slowdown isresponsible for the widespread decline in the labor share of nationalincome. In a neoclassical growth model with endogenous human capitalaccumulation a la Ben Porath (1967) and capital-skill complementaritya la Grossman et al. (2017), the steady-state labor share is positivelycorrelated with the rates of capital-augmenting and labor-augmentingtechnological progress. We calibrate the key parameters describing thebalanced growth path to U.S. data for the early postwar period and find thata one percentage point slowdown in the growth rate of per capita income canaccount for between one half and all of the observed decline in the U.S.labor share.
Keywords: neoclassical growth; balanced growth; technological progress; capital-skill complementarity; labor share; capital share
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| global productivity slowdown (O49) | decline in the labor share of national income (E25) |
| global productivity slowdown (O49) | reduction in capital-augmenting technological progress rates (O49) |
| global productivity slowdown (O49) | reduction in labor-augmenting technological progress rates (J89) |
| reduction in capital-augmenting technological progress rates (O49) | decrease in steady-state labor share (J29) |
| reduction in labor-augmenting technological progress rates (J89) | decrease in steady-state labor share (J29) |
| global productivity slowdown (O49) | decrease in effective capital-to-labor ratio (D29) |
| decrease in effective capital-to-labor ratio (D29) | redistribution of income from labor to capital (D33) |
| global productivity slowdown (O49) | optimal schooling choices (I21) |
| optimal schooling choices (I21) | increase in education levels (I24) |
| one percentage point slowdown in per capita income growth (F62) | decline in U.S. labor share (E25) |