Transitional dynamics of output and factor income shares: lessons from East Germany
AbstractI evaluate the quantitative implications of technology change and government policies for output and factor income shares during East Germany's transition since 1990. I model an economy that gains access to a high productivity technology embodied in new plants. As existing low productivity plants decrease production, the capital income share varies due to variation in the profit share of these plants. Two policies - transfers and government-mandated wage increases - have opposite effects on output growth, but both contribute to reducing the capital share during the transition. The model's output and capital share line up with counterparts in East German data.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 43.
Date of creation: 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-05 (All new papers)
- NEP-BEC-2010-02-05 (Business Economics)
- NEP-DGE-2010-02-05 (Dynamic General Equilibrium)
- NEP-EFF-2010-02-05 (Efficiency & Productivity)
- NEP-FDG-2010-02-05 (Financial Development & Growth)
- NEP-TRA-2010-02-05 (Transition Economics)
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