The productivity slowdown and the declining labor share: A neoclassical exploration

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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.

October 17, 2017


Gene M. Grossman Elhanan Helpman Ezra Oberfield Thomas Sampson


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