Template-Type: ReDIF-Paper 1.0 
Title: On the Optimal Labor Income Share
Author-Name: Jakub Growiec 
Author-Name: Peter McAdam 
Author-Name: Jakub Mućk 
Abstract: Labor's share of income has attracted interest in recent years reflecting itsapparent decline. These falls, witnessed across many countries, are usuallydeemed undesirable. Any such assertion, however, begs the questionof what is the socially optimal labor share. We address this question usinga micro-founded endogenous growth model calibrated on US data. Wefind that in our central calibration the socially optimal labor share is 17% (11 pp) above the decentralized equilibrium, calibrated to match the averageobserved in history. We also study the dependence of both long-run growth equilibriaon model parameters and relate our results to Piketty's ''laws of Capitalism''. Finally, we demonstrate that cyclical movements infactor income shares are socially optimal and that the decentralized equilibriumtypically does not generate excess volatility.
Number: 2018-031
Length: 35 pages 
Creation-Date: 2018-02
Keywords: labor income share, rndogenous growth, factor augmenting, endogenous technical change, social optimum, decentralized allocation
Classification-JEL: O33, O41
File-URL: https://hdl.handle.net/20.500.12182/1167
File-Format: Application/pdf
DOI: 10.33119/kaewps2018031
Handle: RePEc:sgh:kaewps:2018031