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Labor shares in a model of induced innovation

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  • Zuleta, Hernando
  • Young, Andrew T.

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.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 24 (2013)
Issue (Month): C ()
Pages: 112-122

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Handle: RePEc:eee:streco:v:24:y:2013:i:c:p:112-122

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Web page: http://www.elsevier.com/locate/inca/525148

Related research

Keywords: Labor share; Factor shares; Development; Biased technical change; Capital intensity;

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References

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Cited by:
  1. Marion Davin & Karine Gente & Carine Nourry, 2013. "Should a Country Invest more in Human or Physical Capital? A Two-Sector Endogenous Growth Approach," AMSE Working Papers 1330, Aix-Marseille School of Economics, Marseille, France, revised May 2013.
  2. Jean-François FAGNART & Marc GERMAIN & Alphonse MAGNUS, 2013. "Soutenabilité forte, rente et partage de la valeur ajoutée," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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