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Labor's shares - aggregate and industry: accounting for both in a model of unbalanced growth with induced innovation

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  • Hernando Zuleta

    ()

  • Andrew T. Young

    ()

Abstract

The relative stability of aggregate labor's share constitutes one of the great macroeconomic ratios. However, relative stability at the aggregate level masks the unbalanced nature of industry labor's shares - the Kuznets stylized facts underlie those of Kaldor. We present a two-sector - one labor-only and the other using both capital and labor - model of unbalanced economic development with induced innovation that can rationalize these phenomena as well as several other empirical regularities of actual economies. Specifically, the model features (i) one sector ("goods" production) becoming increasingly capital-intensive over time; (ii) an increasing relative price and share in total output of the labor-only sector ("services"); and (iii) diverging sectoral labor's shares despite (iii) an aggregate labor's share that converges from above to a value between 0 and unity. Furthermore, the model (iv) supports either a neoclassical steady-state or long-run endogenous growth, giving it the potential to account for a wide range of real world development experiences.

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Bibliographic Info

Paper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 003105.

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Length: 55
Date of creation: 01 Jan 2007
Date of revision:
Handle: RePEc:col:000092:003105

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Related research

Keywords: Labor's Share; Factor Shares; Development; Biased Technical Change; Capital Intensity;

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References

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Citations

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Cited by:
  1. Francisco Alvarez-Cuadrado & Ngo Van Long, 2011. "Capital-Labor Substitution, Structural Change and Growth," Cahiers de recherche 12-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," NBER Working Papers 12475, National Bureau of Economic Research, Inc.
  3. Arpaia, Alfonso & Pérez, Esther & Pichelmann, Karl, 2009. "Understanding labour income share dynamics in Europe," MPRA Paper 15649, University Library of Munich, Germany.
  4. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
  5. Justin Yifu Lin & Pengfei Zhang, 2007. "Development Strategy, Optimal Industrial Structure and Economic Growth in Less Developed Countries," Development Economics Working Papers 22710, East Asian Bureau of Economic Research.
  6. Stijepic, Denis & Wagner, Helmut, 2011. "Implementation of technological breakthroughs at sector level and the technology-bias," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48707, Verein für Socialpolitik / German Economic Association.
  7. Capolupo, Rosa, 2008. "The New Growth Theories and Their Empirics after Twenty Years," Economics Discussion Papers 2008-27, Kiel Institute for the World Economy.

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