Working Paper 2017-10: Gene M. Grossman, Elhanan Helpman, Ezra Oberfield, Thomas Sampson
Gene M. Grossman, Jacob Viner Professor of International Economics, Princeton University
Elhanan Helpman, Galen L. Stone Professor of International Trade , Harvard University
Ezra Oberfield, Assistant Professor of Economics, Princeton University
Thomas Sampson, Assistant Professor of Economics, London School of Economics
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 à la Ben Porath (1967) and capital-skill complementarity à 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.