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Measuring Factor Income Shares at the Sector Level - A Primer

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  • Herrendorf, Berthold
  • Valentinyi, Akos

Abstract

Many applications in economics use multi-sector versions of the growth model with Cobb--Douglas production functions at the sector level. In this paper, we measure the U.S. income shares of capital and labour for five sectors that encompass the typical sectors used in the literature. We also split the capital shares of these five sectors into the sector income shares of land and of structures and equipment. We find that the factor income shares differ widely across sectors. For example the capital share in agriculture is about twice that in construction. Moreover, the land shares in agriculture and in services are sizeable whereas the land shares in all other sectors are small. Our findings suggest that the general practice of using the economy-wide factor income shares also at the sector level is not a good practice.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6271.

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Date of creation: Apr 2007
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Handle: RePEc:cpr:ceprdp:6271

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Keywords: industry-by-commodity total requirement matrix; input-output tables; sector factor shares;

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Cited by:
  1. Berthold Herrendorf & Richard Rogerson & Ákos Valentinyi, 2009. "Two Perspectives on Preferences and Structural Transformation," NBER Working Papers 15416, National Bureau of Economic Research, Inc.
  2. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
  3. Klaus Desmet & Esteban Rossi-Hansberg, 2009. "Spatial Development," NBER Working Papers 15349, National Bureau of Economic Research, Inc.
  4. Loris Rubini, 2010. "Innovation and the Elasticity of Trade Volumes to Tariff Reductions," 2010 Meeting Papers 570, Society for Economic Dynamics.
  5. Stefano Eusepi & Bart Hobijn & Andrea Tambalotti, 2009. "CONDI: a cost-of-nominal-distortions index," Working Paper Series 2009-03, Federal Reserve Bank of San Francisco.
  6. David Albouy, 2009. "What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values," NBER Working Papers 14981, National Bureau of Economic Research, Inc.

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