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Rents, Technical Change, and Risk Premia: Accounting for Secular Trends in Interest Rates, Returns on Capital, Earning Yields, and Factor Shares

Ricardo J. Caballero, Emmanuel Farhi, Pierre-Olivier Gourinchas

NBER Working Paper No. 23127
Issued in February 2017, Revised in June 2017
NBER Program(s):Economic Fluctuations and Growth

The secular decline in safe interest rates since the early 1980s has been the subject of considerable attention. In this short paper, we argue that it is important to consider the evolution of safe real rates in conjunction with three other first-order macroeconomic stylized facts: the relative constancy of the real return to productive capital, the decline in the labor share, and the decline and subsequent stabilization of the earnings yield. Through the lens of a simple accounting framework, these four facts offer insights into the economic forces that might be at work.

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Document Object Identifier (DOI): 10.3386/w23127

Published: Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2017. "Rents, Technical Change, and Risk Premia Accounting for Secular Trends in Interest Rates, Returns on Capital, Earning Yields, and Factor Shares," American Economic Review, American Economic Association, vol. 107(5), pages 614-620, May. citation courtesy of

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