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

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  • Gene Grossman
  • Elhanan Helpman
  • Ezra Oberfield
  • Thomas Sampson

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 à la Ben Porath (1967) and capital-skill complementarity à 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 postwar 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 U.S. labor share.

Suggested Citation

  • Gene Grossman & Elhanan Helpman & Ezra Oberfield & Thomas Sampson, 2017. "The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration," CESifo Working Paper Series 6714, CESifo.
  • Handle: RePEc:ces:ceswps:_6714
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    More about this item

    Keywords

    neoclassical growth; balanced growth; technological progress; capital-skill complementarity; labor share; capital share;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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