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Endogenous education and long-run factor shares

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  • Grossman, Gene M.
  • Helpman, Elhanan
  • Oberfield, Ezra
  • Sampson, Thomas

Abstract

We study the determinants of factor shares in a neoclassical environment with capital-skill complementarity and endogenous education. In this environment estimates of the elasticity of substitution between capital and labor that fail to account for human capital levels will be biased upward. We develop a model with overlapping generations, technology-driven neoclassical growth, and ongoing increases in educational attainment. For a class of production functions featuring capital-skill complementarity, a balanced growth path exists and is characterized by an inverse relationship between the rates of capital-and labor-augmenting technological progress and the capital share in national income.

Suggested Citation

  • Grossman, Gene M. & Helpman, Elhanan & Oberfield, Ezra & Sampson, Thomas, 2021. "Endogenous education and long-run factor shares," LSE Research Online Documents on Economics 106968, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:106968
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    Cited by:

    1. Gene M. Grossman & Elhanan Helpman & Ezra Oberfield & Thomas Sampson, 2021. "Endogenous Education and Long-Run Factor Shares," American Economic Review: Insights, American Economic Association, vol. 3(2), pages 215-232, June.
    2. Dilip Mookherjee & Debraj Ray, 2022. "Growth, Automation and the Long-Run Share of Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 1-26, October.
    3. Bustos, Emil, 2023. "The Effect of Centrally Bargained Wages on Firm Growth," Working Paper Series 1456, Research Institute of Industrial Economics.
    4. Dilip Mookherjee & Debraj Ray, 2022. "Growth, Automation and the Long-Run Share of Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 1-26, October.
    5. Roya Taherifar & Mark J. Holmes & Gazi M. Hassan, 2023. "The drivers of labour share and impact on pay inequality: A firm-level investigation," Working Papers in Economics 23/03, University of Waikato.

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    More about this item

    Keywords

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

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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