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

51 Pages Posted: 25 Sep 2017 Last revised: 6 Mar 2025

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University

Ezra Oberfield

Princeton University

Thomas Sampson

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2017

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.

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan and Oberfield, Ezra and Sampson, Thomas, The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration (September 2017). NBER Working Paper No. w23853, Available at SSRN: https://ssrn.com/abstract=3042434

Gene M. Grossman (Contact Author)

Princeton University - Princeton School of Public and International Affairs ( email )

300 Fisher Hall
Prospect Avenue
Princeton, NJ 08544-1021
United States
609-258-4823 (Phone)
609-258-1374 (Fax)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Elhanan Helpman

Harvard University ( email )

Ezra Oberfield

Princeton University ( email )

Princeton, NJ 08544-1021
United States

Thomas Sampson

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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

Paper statistics

Downloads
137
Abstract Views
710
Rank
297,593
PlumX Metrics