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The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration

Gene M. Grossman, Elhanan Helpman, Ezra Oberfield () and Thomas Sampson

CEP Discussion Papers from Centre for Economic Performance, LSE

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 post-war 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 US labor share.

Keywords: neoclassical growth; balanced growth; technological progress; capital-skill complementarity; labor share; capital share (search for similar items in EconPapers)
JEL-codes: E25 O40 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-dge, nep-gro, nep-ltv and nep-mac
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Working Paper: The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration (2017) Downloads
Working Paper: The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration (2017) Downloads
Working Paper: The productivity slowdown and the declining labor share: a neoclassical exploration (2017) Downloads
Working Paper: The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration (2017) Downloads
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