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

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  • Sampson, Thomas
  • Grossman, Gene
  • Helpman, Elhanan
  • Oberfield, Ezra

Abstract

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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  • Sampson, Thomas & Grossman, Gene & Helpman, Elhanan & Oberfield, Ezra, 2017. "The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration," CEPR Discussion Papers 12342, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12342
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    Keywords

    Neoclassical growth; Balanced growth; Technological progress; Capital-skill complementarity; Labor share; Capital share;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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