Full Citation

Title: Capital-skill complementarity, sectoral labor productivity, and structural transformation

Citation Type: Journal Article

Publication Year: 2020

ISBN:

ISSN: 01651889

DOI: 10.1016/j.jedc.2020.103902

NSFID:

PMCID:

PMID:

Abstract: In the postwar U.S. economy, labor productivity has been growing faster in the goods sector versus the service sector. This paper argues that this sectoral labor productivity growth gap can largely be explained by the fact that capital intensity also increases faster in the goods sector. I build a two-sector neoclassical growth model in which capital substitutes low-skilled labor but complements high-skilled labor, and the goods sector is more intensive in low-skilled labor relative to the service sector, as observed in the data. As capital becomes more abundant relative to labor along economic growth, low-skilled labor is substituted by capital, leading to faster growth of capital intensity and hence labor productivity in the goods sector. Using a calibrated model, I find that two thirds of the sectoral labor productivity growth gap can be explained by capital accumulation and its interaction with capital-skill complementarity.

Url: https://www.sciencedirect.com/science/article/abs/pii/S0165188920300701

User Submitted?: No

Authors: Chen, Chaoran

Periodical (Full): Journal of Economic Dynamics and Control

Issue:

Volume: 116

Pages: 103902

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other

Countries: