THE IMPACT OF RAISING THE UNITED-STATES INVESTMENT RATE ON THE WAGE OF LOW-EDUCATED LABOR

We estimate the quantitative impact of an increase in the U.S. investm ent rate on the real and relative wage of low-educated labor. Using a three-factor translog production function, we find that the elasticity of the real wage (marginal product) of low-educated labor with respec t to capital is positive, but smaller than the elasticity of high-educ ated labor. Simulating the impact of a phased 20% increase (from 15% t o 18%) in the U.S. gross investment rate, we find that in year 20 the real wage of low-educated labor would be 4.3% higher, and the relative wage would be 4.7% lower, on the high investment path than on the low investment path.