Productive government investment and the labor share

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dc.contributor.authorBom, Pedro
dc.contributor.authorErauskin Iurrita, Iñaki
dc.date.accessioned2024-11-13T10:55:44Z
dc.date.available2024-11-13T10:55:44Z
dc.date.issued2022-11
dc.date.updated2024-11-13T10:55:44Z
dc.description.abstractA recent body of literature has sought to determine the causes of the global decline of the labor share. We study the role played by government investment—which has also fallen in many advanced economies over the past few decades—in the labor share decline. We first establish a theoretical link between government investment and the labor share using a general equilibrium macroeconomic model, where government capital enters the production function in a factor-augmenting fashion. Our analytic results show that a permanent cut to government investment causes a steady-state decline in the labor share if the elasticity of substitution between private capital and labor is less than one and public capital augments private capital. We then study the empirical relationship between these variables using two panel datasets covering 79 countries, both developing and developed, over the period 1970–2017. Using a system GMM estimator, we find a positive and statistically significant association between government investment and the labor share in advanced economies; for developing countries, however, we find no effect.en
dc.description.sponsorshipIñaki Erauskin acknowledges financial support from Programa de Movilidad del Personal Investigador del Departamento de Educación, Política Lingüística y Cultura del Gobierno Vasco and Programa de apoyo a los grupos del sistema universitario vasco del Departamento de Educación, Política Lingüística y Cultura del Gobierno Vasco (Grupo de investigación IT885-16)en
dc.identifier.citationBom, P. R. D., & Erauskin, I. (2022). Productive government investment and the labor share. International Review of Economics and Finance, 82, 347-363. https://doi.org/10.1016/J.IREF.2022.06.017
dc.identifier.doi10.1016/J.IREF.2022.06.017
dc.identifier.issn1059-0560
dc.identifier.urihttp://hdl.handle.net/20.500.14454/1814
dc.language.isoeng
dc.publisherElsevier Inc.
dc.rights© 2022 The Author(s)
dc.subject.otherFactor income shares
dc.subject.otherLabor share
dc.subject.otherProductive government investment
dc.subject.otherPublic capital
dc.subject.otherPublic infrastructure
dc.subject.otherPublic Investment
dc.titleProductive government investment and the labor shareen
dc.typejournal article
dcterms.accessRightsopen access
oaire.citation.endPage363
oaire.citation.startPage347
oaire.citation.titleInternational Review of Economics and Finance
oaire.citation.volume82
oaire.licenseConditionhttps://creativecommons.org/licenses/by-nc-nd/4.0/
oaire.versionVoR
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