Essays on Macroeconomic Trends and Cycles

Over the past thirty years, employment and income shares of routine-intensive occupations have declined significantly relative to nonroutine occupations, and the overall US labor income share has declined relative to capital. Further, the decline of routine employment has been largely concentrated during recessions and ensuing recoveries. In this paper, I build a model of unbalanced growth to assess the role of computerization and advances in Information Technology (IT) in driving these labor market trends and cycles. I augment a neoclassical growth model with exogenous IT progress, which takes the form of Routine-Biased Technological Change (RBTC). In the model, IT capital is a substitute for routine labor and a complement for nonroutine labor, so that growth in IT drives the decline of routine and the rise of nonroutine employment and income shares. I show analytically that RBTC causes the elasticity of substitution between the overall capital and labor to decline over time, and the labor income share to follow a U-shaped path in the long run. Intuitively, this path stems from the monotonic decline of the routine labor share being increasingly offset by the monotonic rise of the nonroutine labor share. This novel prediction suggests that under continued IT progress, the recent decline of the overall labor share relative to capital may be only temporary. Quantitatively, the mode