Explaining labour-income share and constant elasticity of substitution

When we model production functions in macroeconomics, the broad ingredients we have for output growth are labour and capital – our factors of production. Both of these factors need to be remunerated, which raises the question of what share of income goes to each.

This is the question of factor income shares.

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What is the gig economy?

As Motu has noted, the gig economy is an emerging part of the labour market with the features of independent contracting. In the gig economy world, there is little to no cost of switching the job to another is involved. Examples of the gig economy activities include: Uber drivers, YouTube bloggers/ social influencers, independent consultants and etc. 

So how can we think about the labour market in a world where work switches towards the gig economy?

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Where have the Boxing day sales gone?

Merry Christmas fine people!

So it is Christmas. How about this year I don’t:

Honestly, I used to do the same thing every year.

My way of precommiting to that was to time this post to go up on … Boxing Day! The presents are given, the inappropriate behaviour is done, and now we are ready to go shopping.

But those big sales back when I worked in retail appear to be largely gone. Why?

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Tax, cost of capital, and investment

Last time I discussed the relationship between the cost of capital and investment.

Given that motivation, the goal of this post is to understand whether investment is responsive to changes in the UCC due to changes in tax settings. This does two things:

  • Provides evidence regarding whether the capital stock will ultimately be influenced by corporate tax policy changes.
  • Helps us understand how changes in the cost of capital can “shift” investment through time, thereby helping economic stabilisation. Note: The cost of capital varies with both taxes and interest rates, so this relates across to monetary policy!
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Finally finished my PhD!

Hey TVHE. Back in the day I used to write on this site, but then all the interesting feedback and discussion on this site convinced me to do my PhD – and yesterday I finally got it awarded.

Just wanted to say thanks! If it wasn’t for the active discussion here and the passionate New Zealand economics community I would never have done it.

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What is the cost of capital and investment link?

In this post I intend to motivate research that is underway by Lynda Sanderson and myself on the investment behaviour of New Zealand firms. [“Taxation, user cost of capital and investment behaviour of NZ firms” forthcoming]

The goal of our current research is to understand how changes in tax settings in New Zealand have influenced the investment behaviour of firms.  Doing this involves thinking about how taxation can influence investment. The key channel it does so is by influencing the price associated with investment – what is called the user cost of capital.

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