DP12342 The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration

• Thomas Sampson Gene M. Grossman Elhanan Helpman Ezra Oberfield
29 Sep 2017

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.