Labor Share and Productivity Dynamics

Sekyu Choi () and José-Víctor Ríos-Rull
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Sekyu Choi: University of Bristol

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We present a novel way to model technological shocks, with the feature that it can be biased towards more recently installed production units. We show that at one extreme, the shock is like a neutral technological shock, while at the other end of the spectrum, it resembles investment speci?c technological shocks, since it a?ects newly created machines the most. To make these ideas operational, we embed our proposed shocks in a model with putty-clay technology (where the notion of new and old ?rms is clear). We estimate the process for the shocks requiring that the model replicates the volatility properties of the Solow residual and the overshooting property of the labor share of output. Our estimates point to three factors to be capable of replicating well such overshooting property: putty-clay nature of technology, a time bias in the shocks towards new plants and competitive wage setting.

Keywords: Factor Shares; Technology shocks; Putty-Clay; Business Cycles (search for similar items in EconPapers)
JEL-codes: E01 E13 E25 E32 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-08-12
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Citations: View citations in EconPapers (2)

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Journal Article: Labour Share and Productivity Dynamics (2021)
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