Capital Augmenting Technical Change and Time-Varying Labor Share

40 Pages Posted: 18 Feb 2013

See all articles by Pengfei Zhang

Pengfei Zhang

Peking University - School of Economics

Date Written: February 16, 2013

Abstract

We construct a hybrid model of endogenous and semi-endogenous growth to reconcile medium-run changes with long-run constancy of the labor share. Given the fixed population size, endogenous growth in the labor intensive sector implies that labor augmenting technical change could take place at a positive constant rate in the long-run, whereas capital augmenting technical change could only take place during transitional dynamics owing to semi-endogenous growth in the capital intensive sector. The time-varying labor share in the medium-run is the direct result of capital augmenting technical change. Nevertheless, purely labor augmenting technical change in the steady state implies that the labor share must be stable in the long-run.

Keywords: Biased Technical Change, Endogenous Growth, Labor Share, Lucas Paradox, Semi-endogenous Growth

JEL Classification: O41, O33, O31, E25

Suggested Citation

Zhang, Pengfei, Capital Augmenting Technical Change and Time-Varying Labor Share (February 16, 2013). Available at SSRN: https://ssrn.com/abstract=2219561 or http://dx.doi.org/10.2139/ssrn.2219561

Pengfei Zhang (Contact Author)

Peking University - School of Economics ( email )

Beijing
China
86-10-6275-2016 (Phone)
86-10-6275-1460 (Fax)

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