The labor share of national income in the United States has declined since the 1980s and especial... more The labor share of national income in the United States has declined since the 1980s and especially after 2000. This paper focuses on the role played by technological change in this process. In particular, firms that adopt new technologies achieve a low labor share, and take a larger market share over time. An example is online retailers such as Amazon, empowered by information technology, that have a lower labor share than traditional retailers, and have continually expanded over the last 20 years. This reallocation process drives down the aggregate labor share. We first document three facts: (i) across sectors, there is a negative correlation between change in concentration and change in the labor share; (ii) large firms usually exhibit a smaller labor share; (iii) in sectors where the labor share declines, the decline is especially strong among large firms. Specifically, gains in labor productivity are not associated with comparable increases in wages. Then we provide a rationale...
We review the empirical evidence about factor shares and show that, apart from a varying trend, t... more We review the empirical evidence about factor shares and show that, apart from a varying trend, they are characterized by a strong and persistent cyclical behavior. We argue that existing models of the business cycles cannot replicate these facts. Next we study a model of growth and innovation under competitive conditions. Firms choose how many workers to hire, how much to invest, and which production technique to use. New productive capacity, embodying labor saving techniques, is costly. Central to our theory are endogenous movements in relative factor prices creating incentives for replacing old technologies with new ones. The endogenous interaction between labor-saving innovations and changes in the relative price of labor is the source of both growth and cycles .
In the modern theory of innovation, monopoly plays a crucial role both as a cause and as well as ... more In the modern theory of innovation, monopoly plays a crucial role both as a cause and as well as an effect of creative economic activity. An innovative firm wouldn’t have enough incentive to innovate without the prospect of monopoly power. In this paper we argue that monopoly is neither a cause for, nor a necessary consequence of innovation. In particular, intellectual property is not necessary for innovation and growth. We show that competitive rents allow creative individuals to appropriate a large enough share of the social surplus generated by their innovations to compensate for their opportunity cost. We provide various examples of how competitive markets for innovative products would work in the absence of IP and critically discuss a number of common fallacies in the previous literature. Therefore, our conclusions are that the IP shouldn’t be the default, but rather the exception. JEL classification: X15; X16; D42; D62.
After the fall in fertility during the Demographic Transition, many developed countries experienc... more After the fall in fertility during the Demographic Transition, many developed countries experienced a baby bust, followed by the Baby Boom and subsequently a return to low fertility. Received wisdom from the Demography literature links these large fluctuations in fertility to the series of Economics 'shocks' that occurred with similar timing -- the Great Depression, WWII, the economic expansion that followed and then the productivity slow down of the 1970's. To economists, this line of argument suggests a more general link between fluctuations in output and fertility decisions, of which the Baby-Bust-Boom-Bust event (BBB) is a particularly stark example. This paper is an attempt to formalize the conventional wisdom in simple versions of stochastic growth models with endogenous fertility. First, we develop initial tools to address the effects of ''temporary'' shocks to productivity on fertility choices. Second, we analyze calibrated versions of these model...
The labor share of national income in the United States has declined since the 1980s and especial... more The labor share of national income in the United States has declined since the 1980s and especially after 2000. This paper focuses on the role played by technological change in this process. In particular, firms that adopt new technologies achieve a low labor share, and take a larger market share over time. An example is online retailers such as Amazon, empowered by information technology, that have a lower labor share than traditional retailers, and have continually expanded over the last 20 years. This reallocation process drives down the aggregate labor share. We first document three facts: (i) across sectors, there is a negative correlation between change in concentration and change in the labor share; (ii) large firms usually exhibit a smaller labor share; (iii) in sectors where the labor share declines, the decline is especially strong among large firms. Specifically, gains in labor productivity are not associated with comparable increases in wages. Then we provide a rationale...
We review the empirical evidence about factor shares and show that, apart from a varying trend, t... more We review the empirical evidence about factor shares and show that, apart from a varying trend, they are characterized by a strong and persistent cyclical behavior. We argue that existing models of the business cycles cannot replicate these facts. Next we study a model of growth and innovation under competitive conditions. Firms choose how many workers to hire, how much to invest, and which production technique to use. New productive capacity, embodying labor saving techniques, is costly. Central to our theory are endogenous movements in relative factor prices creating incentives for replacing old technologies with new ones. The endogenous interaction between labor-saving innovations and changes in the relative price of labor is the source of both growth and cycles .
In the modern theory of innovation, monopoly plays a crucial role both as a cause and as well as ... more In the modern theory of innovation, monopoly plays a crucial role both as a cause and as well as an effect of creative economic activity. An innovative firm wouldn’t have enough incentive to innovate without the prospect of monopoly power. In this paper we argue that monopoly is neither a cause for, nor a necessary consequence of innovation. In particular, intellectual property is not necessary for innovation and growth. We show that competitive rents allow creative individuals to appropriate a large enough share of the social surplus generated by their innovations to compensate for their opportunity cost. We provide various examples of how competitive markets for innovative products would work in the absence of IP and critically discuss a number of common fallacies in the previous literature. Therefore, our conclusions are that the IP shouldn’t be the default, but rather the exception. JEL classification: X15; X16; D42; D62.
After the fall in fertility during the Demographic Transition, many developed countries experienc... more After the fall in fertility during the Demographic Transition, many developed countries experienced a baby bust, followed by the Baby Boom and subsequently a return to low fertility. Received wisdom from the Demography literature links these large fluctuations in fertility to the series of Economics 'shocks' that occurred with similar timing -- the Great Depression, WWII, the economic expansion that followed and then the productivity slow down of the 1970's. To economists, this line of argument suggests a more general link between fluctuations in output and fertility decisions, of which the Baby-Bust-Boom-Bust event (BBB) is a particularly stark example. This paper is an attempt to formalize the conventional wisdom in simple versions of stochastic growth models with endogenous fertility. First, we develop initial tools to address the effects of ''temporary'' shocks to productivity on fertility choices. Second, we analyze calibrated versions of these model...
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