Revisiting Capital-Skill Complementarity, Inequality, and Labor Share / Lee E. Ohanian, Musa Orak, Shihan Shen.

Format:

Book

Author/Creator:

Ohanian, Lee E.

Contributor:

National Bureau of Economic Research.

Orak, Musa.

Shen, Shihan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28747.

NBER working paper series no. w28747

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

This paper revisits capital-skill complementarity and inequality, as in Krusell, Ohanian, Rios-Rull and Violante (KORV, 2000). Using their methodology, we study how well the KORV model accounts for more recent data, including the large changes in labor's share of income that were not present in KORV. We study both labor share of gross income (as in KORV), and income net of depreciation. We also use non-farm business sector output as an alternative measure of production to real GDP. We find strong evidence for continued capital-skill complementarity in the most recent data, and that the model continues to closely account for the skill premium. The model captures the average level of labor share, though it overpredicts its level by 2-4 percentage points at the end of the period.

Notes:

Print version record

April 2021.