Reports of the literature documenting the declining labor share of income have increased greatly in the past few years, which is opposed to one of the famous Kaldor (1961) “stylized facts” of growth. The declining labor income share has been observed since the 1980s in a number of countries,...

We extend the Lucas' 1988 model introducing two classes of agents with heterogeneous skills, discount factors and initial human capital endowments. We consider two regimes according to the planner's political constraints. In the first regime, that we call meritocracy, the planner faces...