Rents, Technical Change, and Risk Premia: Accounting for Secular Trends in Interest Rates, Returns on Capital, Earning Yields, and Factor Shares
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.
This paper was prepared for the AER Papers and Proceedings session "Monetary and Financial Markets Interventions Around the World" at the 2017 AEA meetings. For useful comments, we thank Daron Ace- moglu, Jocelyn Boussard, Markus Brunnermeier, John Campbell, Gabriel Chodorow-Reich, Paul Gomme, Arvind Krishnamurthy, Matteo Maggiori, Thomas Philippon, Jeremy Stein, and our discussant Guido Lorenzoni. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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