Rents, Technical Change, and Risk Premia

13 Pages Posted: 24 Mar 2017

See all articles by Ricardo J. Caballero

Ricardo J. Caballero

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Emmanuel Farhi

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Pierre-Olivier Gourinchas

University of California, Berkeley - Department of Economics; University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: March 21, 2017

Abstract

The secular decline in safe interest rates since the early 1980s has been the subject of considerable attention. In this short paper, we argue that it is important to consider the evolution of safe real rates in conjunction with three other first-order macroeconomic stylized facts: the relative constancy of the real return to productive capital, the decline in the labor share, and the decline and subsequent stabilization of the earnings yield. Through the lens of a simple accounting framework, these four facts offer insights into the economic forces that might be at work.

Suggested Citation

Caballero, Ricardo J. and Farhi, Emmanuel and Gourinchas, Pierre-Olivier, Rents, Technical Change, and Risk Premia (March 21, 2017). MIT Department of Economics Working Paper No. 17-05, Available at SSRN: https://ssrn.com/abstract=2939860 or http://dx.doi.org/10.2139/ssrn.2939860

Ricardo J. Caballero (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Emmanuel Farhi

Harvard University - Department of Economics ( email )

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Pierre-Olivier Gourinchas

University of California, Berkeley - Department of Economics ( email )

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University of California, Berkeley - Economic Analysis & Policy Group ( email )

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United States

HOME PAGE: http://sites.google.com/view/pgourinchas

National Bureau of Economic Research (NBER)

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HOME PAGE: http://www.nber.org/people/pierre-olivier_gourinchas

Centre for Economic Policy Research (CEPR)

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