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A Dynamic Theory of the Declining Aggregated Labor Income Share: Intangible Capital vs. Tangible Capital

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  • Takahashi, Harutaka
  • Le Riche, Antoine

Abstract

Reports of the literature documenting the declining labor share of income have increased greatly in the past few years, which is opposed to one of the famous Kaldor (1961) “stylized facts” of growth. The declining labor income share has been observed since the 1980s in a number of countries, and especially in the United States. Recent studies have revealed the following five major driving forces of the declining labor share: (i) supercycles and boom-busts, (ii) rising and faster depreciation, (iii) superstar effects and consolidation, (iv) capital substitution and automation, and (v) globalization and labor bargaining power. We set up a two-sector optimal growth model with the R&D intermediate sectors. By integrating driving factors (ii) through (iv) above into the model, we demonstrate the long-term decline of the aggregated labor income share.

Suggested Citation

  • Takahashi, Harutaka & Le Riche, Antoine, 2020. "A Dynamic Theory of the Declining Aggregated Labor Income Share: Intangible Capital vs. Tangible Capital," MPRA Paper 101564, University Library of Munich, Germany, revised 05 Apr 2020.
    • Handle: RePEc:pra:mprapa:101564
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    1. Yating Dai & Jian Cheng & Daolin Zhu, 2022. "Understanding the Impact of Land Supply Structure on Low Consumption: Empirical Evidence from China," Land, MDPI, vol. 11(4), pages 1-18, April.

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    More about this item

    Keywords

    capital intensity; elasticity of substitution; intangible capital stock; invented property and product capital (IPP); learning-by-doing technical progress; two-sector optimal growth model 1;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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