Working Paper: NBER ID: w23853
Authors: Gene M. Grossman; Elhanan Helpman; Ezra Oberfield; Thomas Sampson
Abstract: We explore the possibility that a global productivity slowdown is responsible for the widespread decline in the labor share of national income. In a neoclassical growth model with endogenous human capital accumulation a la Ben Porath (1967) and capital-skill complementarity a la Grossman et al. (2017), the steady-state labor share is positively correlated with the rates of capital-augmenting and labor-augmenting technological progress. We calibrate the key parameters describing the balanced growth path to U.S. data for the early postwar period and find that a one percentage point slowdown in the growth rate of per capita income can account for between one half and all of the observed decline in the U.S. labor share.
Keywords: Productivity Slowdown; Labor Share; Neoclassical Growth Model; Human Capital; Capital-Skill Complementarity
JEL Codes: E13; E25; J24; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Productivity Slowdown (O49) | Deceleration of Human Capital Accumulation (O49) |
| Deceleration of Human Capital Accumulation (O49) | Long-run Decline in Labor Share of Income (E25) |
| Productivity Slowdown (O49) | Long-run Decline in Labor Share of Income (E25) |
| Productivity Slowdown (O49) | Real Interest Rate Falls (E43) |
| Real Interest Rate Falls (E43) | Target Higher Level of Education (I23) |
| Target Higher Level of Education (I23) | Reduced Effective Capital-to-Labor Ratio (D24) |
| Reduced Effective Capital-to-Labor Ratio (D24) | Redistribution of Income from Labor to Capital (D33) |