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

Listed author(s):
  • 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23853.

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Date of creation: Sep 2017
Handle: RePEc:nbr:nberwo:23853
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