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Why labor income shares seem to be constant?

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Author Info
Hernando Zuleta

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Abstract

The common assumptions that labor income share does not change over time or across countries and that factor income shares are equal to the elasticity of output with respect to factors have had important implications for economic theory. However, there are several theoretical reasons for why the elasticity of output with respect to reproducible factors should be correlated with the stage of development. In particular, the behavior of international trade and capital flows and the existence of factor saving innovations imply such a correlation. If this correlation exists and if factor income shares are equal to the elasticity of output with respect to factors then the labor income share must be negatively correlated with the stage of development. The existence of a labor intensive sector that produces non-tradable goods would explain why labor income share has no correlation with income per capita.

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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/09638190701600280&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Publisher Info
Article provided by Taylor and Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 16 (2007)
Issue (Month): 4 ()
Pages: 551-557
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Handle: RePEc:taf:jitecd:v:16:y:2007:i:4:p:551-557

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Related research
Keywords: Factor income shares; elasticity of output with respect to factors; two sector model;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Boldrin, Michele & Levine, David K., 2002. "Factor Saving Innovation," Journal of Economic Theory, Elsevier, vol. 105(1), pages 18-41, July. [Downloadable!] (restricted)
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  2. Alan B. Krueger, 1999. "Measuring Labor's Share," American Economic Review, American Economic Association, vol. 89(2), pages 45-51, May. [Downloadable!] (restricted)
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  3. Hernando Zuleta, 2006. "Factor saving innovations and factor income shares," DOCUMENTOS DE TRABAJO 002706, UNIVERSIDAD DEL ROSARIO - FACULTAD DE ECONOMÍA. [Downloadable!]
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  4. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Brad Sturgill, 2009. "Cross-country Variation in Factor Shares and its Implications for Development Accounting," Working Papers 09-07, Department of Economics, Appalachian State University. [Downloadable!]
  2. Joseph Zeira, 2006. "Machines as Engines of Growth," DEGIT Conference Papers c011_059, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
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  3. Alberto Alesina & Joeph Zeira, . "Technology and Labor Regulations," Working Papers 0729, University of Crete, Department of Economics. [Downloadable!]
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