IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Labor’s Shares in a Model of Induced Innovation

  • Hernando Zuleta

    (Department of Economics, Universidad del Rosario American University in Bulgaria)

  • Andrew T. Young

    (Department of Economics, West Virginia University)

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 sectoral labor's shares. We present a two-sector (manufacturing and services) model with induced innovation that can rationalize these phenomena as well as several other empirical regularities of actual economies. Specifically, along the transition path (i) manufacturing becomes increasingly capital-intensive over time while (ii) there is an increase in the relative price and production share of services and (iii) aggregate labor's share converges from above to a non-zero value. At the sectoral level (iv) labor’s share in manufacturing trends towards zero. Notably, (v) the model may transition to either a neoclassical steady-state or long-run endogenous growth, so it has the potential to account for a wide range of growth experiences.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: First version, 2010
Download Restriction: no

Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 10-01.

in new window

Length: 40 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:wvu:wpaper:10-01
Contact details of provider: Postal:
P.O. Box 6025, Morgantown, WV 26506-6025

Phone: (304) 293-7859
Fax: (304) 293-2233
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  2. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  3. Kongsamut, P. & Rebelo, S. & Xie, D., 1997. "Beyong Balanced Growth," RCER Working Papers 438, University of Rochester - Center for Economic Research (RCER).
  4. Francisco J. Buera & Joseph P. Kaboski, 2009. "The Rise of the Service Economy," NBER Working Papers 14822, National Bureau of Economic Research, Inc.
  5. Holger C. Wolf & Alberto Giovannini & Jose De Gregorio, 1994. "International Evidenceon Tradables and Nontradables Inflation," IMF Working Papers 94/33, International Monetary Fund.
  6. Daron Acemoglu, 2005. "Equilibrium Bias of Technology," NBER Working Papers 11845, National Bureau of Economic Research, Inc.
  7. Ngai, L. Rachel & Pissarides, Christopher A., 2005. "Structural Change in a Multi-Sector Model of Growth," IZA Discussion Papers 1800, Institute for the Study of Labor (IZA).
  8. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  9. John Laitner, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 545-561.
  10. Daron Acemoglu, 2001. "Directed Technical Change," NBER Working Papers 8287, National Bureau of Economic Research, Inc.
  11. Hernando Zuleta, 2004. "A Note on Scale Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 237-242, January.
  12. Vladimir Klyuev, 2005. "Evolution of the Relative Price of Goods and Services in a Neoclassical Model of Capital Accumulation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(3), pages 720-730, July.
  13. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
  14. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  15. Boldrin, Michele & Levine, David, 2002. "Factor Saving Innovation," CEPR Discussion Papers 3262, C.E.P.R. Discussion Papers.
  16. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  17. Zeira, Joseph, 1995. "Workers, Machines and Economic Growth," CEPR Discussion Papers 1139, C.E.P.R. Discussion Papers.
  18. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 537-564.
  19. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
  20. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
  21. Hernando Zuleta, 2007. "Why labor income shares seem to be constant?," DOCUMENTOS DE TRABAJO 003779, UNIVERSIDAD DEL ROSARIO.
  22. Hernando Zuleta, 2008. "Factor Saving Innovations and Factor Income Shares," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 836-851, October.
  23. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
  24. Young, Andrew T., 2010. "One of the things we know that ain't so: Is US labor's share relatively stable?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 90-102, March.
  25. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
  26. Zeira, Joseph, 2005. "Machines as Engines of Growth," CEPR Discussion Papers 5429, C.E.P.R. Discussion Papers.
  27. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
  28. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  29. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 517-549.
  30. Robert Rowthorn & Ramana Ramaswamy, 1999. "Growth, Trade, and Deindustrialization," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 2.
  31. Roberto Torrini, 2005. "Profit share and returns on capital stock in Italy: the role of privatisations behind the rise of the 1990s," LSE Research Online Documents on Economics 19915, London School of Economics and Political Science, LSE Library.
  32. Andrew Young, 2004. "Labor's Share Fluctuations, Biased Technical Change, and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 916-931, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wvu:wpaper:10-01. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Josh Hall)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.