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Endogenous capital-augmenting R&D, intersectoral labor reallocation, and the movement of the labor share

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  • Pengfei Zhang

    (Peking University)

Abstract

I construct a hybrid model of endogenous and semi-endogenous growth to analyze the impact of labor reallocation between capital-augmenting R&D and final-goods production. By affecting the price of capital-intensive goods, factor-augmenting technical change or capital deepening will induce intersectoral labor reallocation between capital-augmenting R&D and final-goods production. The intersectoral labor reallocation in this paper can reverse some seemingly fundamental implications of the neoclassical growth models. In particular, given the gross complementarity of capital and labor, intersectoral labor reallocation implies that capital-augmenting technical change or capital deepening decreases the labor share, while labor-augmenting technical change increases the labor share. In the present model, a strengthening of the capital-augmenting R&D spillover effect helps to increase the importance of investment-specific technology and reduce the relative price of investment goods.

Suggested Citation

  • Pengfei Zhang, 2023. "Endogenous capital-augmenting R&D, intersectoral labor reallocation, and the movement of the labor share," Journal of Economics, Springer, vol. 140(1), pages 1-36, September.
    • Handle: RePEc:kap:jeczfn:v:140:y:2023:i:1:d:10.1007_s00712-023-00828-9
    DOI: 10.1007/s00712-023-00828-9
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    1. Baek, Seungjin & Jeong, Deokjae, 2023. "Factors Influencing Labor Share: Automation, Task Innovation, and Elasticity of Substitution," MPRA Paper 118730, University Library of Munich, Germany.

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    More about this item

    Keywords

    Balanced growth; Biased technology; Labor share; RD spillover;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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