We consider a decentralized version of the neoclassical growth model where labor share is chosen by workers to maximize their long run (permanent) wages. In this framework, if the labor share increases relative to the competitive share, workers capture a larger share of a smaller total income in...

We use annual data on capital's share and relative factor prices from 35 US industries from 1960 to 2005 to test the induced innovation hypothesis. We derive, from a productionfunction framework, testable implications for the effect of contemporaneous and lagged factor price ratios on capital's...