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If factor shares are not constant then we have a measurment problem. can we solve it?

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  • Zuleta, Hernando

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Abstract

Recent evidence show that factor shares, if properly measured, are far from constant. Moreover, the shares of natural resources and raw labor seem to be negatively correlated with income per capita while the share of human and physical capital is positively correlated with income per capita. Now, if factor shares are not constant then (i) growth accounting exercises rely on a false assumption and (ii) there is a measurement problem. The effect that changes in factor shares have on output depend on the relative abundance of factors and, for this reason, it is necessary to have correct measures. We propose an empirical methodology to solve the measurement issue and estimate TFP growth.

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Paper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 005744.

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Length: 6
Date of creation: 13 Aug 2009
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Handle: RePEc:col:000092:005744

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  1. Zeira, Joseph, 2005. "Machines as Engines of Growth," CEPR Discussion Papers 5429, C.E.P.R. Discussion Papers.
  2. 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.
  3. Daron Acemoglu, 2001. "Directed Technical Change," NBER Working Papers 8287, National Bureau of Economic Research, Inc.
  4. Francesco Caselli, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 535-568, 05.
  5. Boldrin, Michele & Levine, David K., 2002. "Factor Saving Innovation," Journal of Economic Theory, Elsevier, vol. 105(1), pages 18-41, July.
  6. Hernando Zuleta, 2007. "An empirical note on factor shares," DOCUMENTOS DE TRABAJO 004363, UNIVERSIDAD DEL ROSARIO.
  7. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  8. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
  9. Hernando Zuleta, 2008. "Factor Saving Innovations and Factor Income Shares," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 836-851, October.
  10. Hernando Zuleta, 2007. "Why labor income shares seem to be constant?," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 16(4), pages 551-557.
  11. Pietro Peretto & John J. Seater, 2006. "Augmentation or Elimination?," DEGIT Conference Papers c011_060, DEGIT, Dynamics, Economic Growth, and International Trade.
  12. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
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Cited by:
  1. Hernando Zuleta & Julián Parada & Andrés García & Jacobo Campo, 2010. "Participación factorial y contabilidad del crecimiento económico en Colombia .Una propuesta de modificación del método de contabilidad del crecimiento," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.

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