Endogenous Labor Share Cycles: Theory and Evidence

72 Pages Posted: 17 Mar 2015

See all articles by Jakub Growiec

Jakub Growiec

National Bank of Poland; Warsaw School of Economics (SGH)

Peter McAdam

European Central Bank (ECB)

Jakub Muck

National Bank of Poland - Department of Economics; Warsaw School of Economics (SGH) - Institute of Econometrics

Date Written: March 16, 2015

Abstract

Based on long US time series we document a range of empirical properties of the labor’s share of GDP, including its substantial medium-run swings. We explore the extent to which these empirical regularities can be explained by a calibrated micro-founded long-run economic growth model with normalized CES technology and endogenous labor- and capital-augmenting technical change driven by purposeful directed R&D investments. It is found that dynamic macroeconomic trade-offs created by arrivals of both types of new technologies may lead to prolonged swings in the labor share due to oscillatory convergence to the balanced growth path as well as stable limit cycles via Hopf bifurcations. Both predictions are broadly in line with the empirical evidence.

Keywords: labor income share, endogenous cycles, factor-augmenting endogenous technical change, technology menu, R&D, CES, normalization

JEL Classification: E25, E32, O33, O41

Suggested Citation

Growiec, Jakub and McAdam, Peter and Muck, Jakub, Endogenous Labor Share Cycles: Theory and Evidence (March 16, 2015). ECB Working Paper No. 1765, Available at SSRN: https://ssrn.com/abstract=2578961 or http://dx.doi.org/10.2139/ssrn.2578961

Jakub Growiec (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH)

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Peter McAdam

European Central Bank (ECB) ( email )

Kaiserstrasse 29
Eurotower
D-60311 Frankfurt am Main
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Jakub Muck

National Bank of Poland - Department of Economics ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) - Institute of Econometrics ( email )

Niepodleglosci 164
Warsaw, 02-554
Poland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
71
Abstract Views
830
rank
444,164
PlumX Metrics