Labor shares in a model of induced innovation

Hernando Zuleta and Andrew Young ()

Structural Change and Economic Dynamics, 2013, vol. 24, issue C, 112-122

Abstract: The relative stability of aggregate labor share constitutes one of the great macroeconomic ratios. However, relative stability at the aggregate level masks the unbalanced nature of sectoral labor shares. We present a two-sector (manufacturing and services) model with induced innovation that can rationalize these phenomena as well as several other empirical regularities of actual economies. Specifically, along the transition path (i) manufacturing becomes increasingly capital-intensive over time while (ii) there is an increase in the relative price and production share of services and (iii) aggregate labor share converges from above to a non-zero value. At the sectoral level (iv) labor share in manufacturing trends toward zero. Notably, (v) the model may transition to either a neoclassical steady-state or long-run endogenous growth, so it has the potential to account for a wide range of growth experiences.

Keywords: Labor share; Factor shares; Development; Biased technical change; Capital intensity (search for similar items in EconPapers)
JEL-codes: O11 O30 O41 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:24:y:2013:i:c:p:112-122

DOI: 10.1016/j.strueco.2012.07.006

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