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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.

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  • 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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