Endogenous Education and Long-Run Factor Shares
AbstractWe study the determinants of factor shares in a neoclassical environment with capital-skill complementarity and endogenous education. In this environment estimates of the elasticity of substitution between capital and labor that fail to account for human capital levels will be biased upward. We develop a model with overlapping generations, technology-driven neoclassical growth, and ongoing increases in educational attainment. For a class of production functions featuring capital-skill complementarity, a balanced growth path exists and is characterized by an inverse relationship between the rates of capital- and labor-augmenting technological progress and the capital share in national income.
CitationGrossman, Gene M., Elhanan Helpman, Ezra Oberfield, and Thomas Sampson. 2021. "Endogenous Education and Long-Run Factor Shares." American Economic Review: Insights, 3 (2): 215-32. DOI: 10.1257/aeri.20200350
- D33 Factor Income Distribution
- E25 Aggregate Factor Income Distribution
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- O33 Technological Change: Choices and Consequences; Diffusion Processes