Knowledge capital accumulation, household student debt, and the labor share in the social product: Evidence from the United States
This paper analyzes the dynamic relationships among knowledge capital accumulation—measured by the share of the population completing college—household student indebtedness, and the functional distribution of income between labor and non-labor in the U.S. over the period 2003–2019. Drawing on the Neo-Kaleckian demand-led framework in the Cambridge, U. K. tradition, it tests the hypotheses that rising student debt exerts downward pressure on labor income, while knowledge capital accumulation mitigates this effect. Despite an expanding theoretical literature, empirical evidence on these dynamic interactions remains severely limited. Using a Vector Autoregression (VAR) framework, the study finds that increases in student debt reduce the labor share primarily through lower real wages, with no significant effect on labor productivity. In contrast, knowledge capital accumulation increases the labor share and contributes to a reduction in student debt. Overall, the results underscore that real wage and labor share determination is shaped by institutional and conflict-distributional factors, thereby supporting policy measures aimed at reducing household student indebtedness, strengthening collective bargaining, and expanding publicly funded education.