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Rents, Technical Change, and Risk Premia: Accounting for Secular Changes in Interest Rates, Returns to Capital, Earnings Yields, and Factor Shares

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  • Ricardo J. Caballero
  • Emmanuel Farhi
  • Pierre-Olivier Gourinchas

Abstract

The secular decline in safe interest rates since the early 1980s has been the subject of considerable attention. In this short paper, we argue that it is important to consider the evolution of safe real rates in conjunction with three other first-order macroeconomic stylized facts: the relative constancy of the real return to productive capital, the decline in the labor share, and the decline and subsequent stabilization of the earnings yield. Through the lens of a simple accounting framework, these four facts offer insights into the economic forces that might be at work.

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  • Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, "undated". "Rents, Technical Change, and Risk Premia: Accounting for Secular Changes in Interest Rates, Returns to Capital, Earnings Yields, and Factor Shares," Working Paper 488731, Harvard University OpenScholar.
    • Handle: RePEc:qsh:wpaper:488731
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    File URL: http://scholar.harvard.edu/farhi/node/488731
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    Cited by:

    1. R. Dixon & G.C. Lim, 2017. "Labor's Share, the Firm's Market Power and TFP," Melbourne Institute Working Paper Series wp2017n22, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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