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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.

Suggested Citation

  • Hernando Zuleta & Andrew T. Young, 2007. "Labor's shares - aggregate and industry: accounting for both in a model of unbalanced growth with induced innovation," Documentos de Trabajo 3105, Universidad del Rosario.
    • Handle: RePEc:col:000092:003105
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    File URL: http://repository.urosario.edu.co/bitstream/handle/10336/10789/3105.pdf
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    Cited by:

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    2. Alvarez-Cuadrado, Francisco & Long, Ngo & Poschke, Markus, 2017. "Capital-labor substitution, structural change and growth," Theoretical Economics, Econometric Society, vol. 12(3), September.
    3. Christopher D. Blake, 2022. "A method for comparing compensation and productivity levels across US regions," SN Business & Economics, Springer, vol. 2(12), pages 1-30, December.
    4. Florian Brugger & Christian Gehrke, 2017. "The Neoclassical Approach to Induced Technical Change: From Hicks to Acemoglu," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 730-776, November.
    5. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    6. Stijepic, Denis & Wagner, Helmut, 2011. "Implementation of technological breakthroughs at sector level and the technology-bias," MPRA Paper 33352, University Library of Munich, Germany, revised 13 Sep 2011.
    7. Arpaia, Alfonso & Pérez, Esther & Pichelmann, Karl, 2009. "Understanding labour income share dynamics in Europe," MPRA Paper 15649, University Library of Munich, Germany.
    8. 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.
    9. Justin Yifu Lin & Pengfei Zhang, 2007. "Development Strategy, Optimal Industrial Structure and Economic Growth in Less Developed Countries," CID Working Papers 19, Center for International Development at Harvard University.
    10. Yoko Oishi & Saumik Paul, 2018. "Sectoral Labor Income Share Dynamics: Cross – Country Evidence from a Novel Dataset," Working Papers id:12930, eSocialSciences.
    11. Nicola Pensiero, 2022. "The effect of computerisation on the wage share in United Kingdom workplaces," The Economic and Labour Relations Review, , vol. 33(1), pages 158-177, March.

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    More about this item

    Keywords

    Labor's Share; Factor Shares; Development; Biased Technical Change; Capital Intensity;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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