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


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


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 a la Ben Porath (1967) and capital-skill complementarity a 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 M. Grossman & Elhanan Helpman & Ezra Oberfield & Thomas Sampson, 2017. "The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration," NBER Working Papers 23853, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23853
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    References listed on IDEAS

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    Cited by:

    1. Anna M. Stansbury & Lawrence H. Summers, 2017. "Productivity and Pay: Is the link broken?," NBER Working Papers 24165, National Bureau of Economic Research, Inc.
    2. repec:eee:rujoec:v:3:y:2017:i:4:p:411-424 is not listed on IDEAS

    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • 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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