, 7 tweets, 2 min read Read on Twitter
A thread about my new @nberpubs paper with @sethbenzell:

Digital innovation is delivering remarkable progress.

Yet returns to ordinary labor (Median wages) and ordinary capital (interest rates) are both historically low. 1/n
@nberpubs One research literature addresses low median wages and falling labor share.

A completely different literature seeks to explain low interest rates and lack of capital investment.

We explain both of these sets facts with one model.

@nberpubs Our story:

Digital technologies augment both labor and capital by creating digital versions of them.

But rather than translating directly into growth, K and L both need a third factor: G.

Even as ordinary labor and capital get lower returns, the owners of a third factor, G, are getting superstar returns.

By definition, G cannot be digitized. But it is indispensable.

It’s whatever Zuckerberg, Bezos and Gates have.

Call it genius, luck, or some combination.

If G is inelastically supplied, then it will get a bigger share of GDP and income, even as digitization makes “vanilla” capital and labor ever more abundant.

We examine the data and find that it matches the predictions of our theory.

Read more here: nber.org/papers/w25585

cc: @SBenzell

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