Labor Income Share and the Relative Price of Investments in the U.S.
On October 2, 2018 at 4:15 pm in Pettengill G21, Edouard Wemy from the Department of Economics of Clark University presented his talk on “Labor Income Share and the Relative Price of Investment in the U.S.”
> Does the nature of the long-run relationship between the labor share and the relative price of investment co-integrate?
> Did investment-specific technological progress play an important role in the growth/decline of the secular trend of the labor share?
Using data from the United States, I perform an empirical analysis to assess the nature of the long-run relationship between the labor share and the relative price of investment. Results from co-integration tests reveals that the share and the relative price of investment are most likely not co-integrated. However, co-variation tests indicate that both time series share a common stochastic component, and additional tests of structural breaks point at the presence of a common change in the mean or trend of both series. These results have important implication as they suggest that investment-specific technological progress – which is considered as the driving force of the long-run behavior of the relative price of investment – may have played an important role in the decline of the secular trend of the labor share.
Sponsored by The Casey Lecture Fund for Economics