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The functional distribution of income: a review of the theoretical literature and of the empirical evidence around its recent pattern in European countries

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Simone Bertoli ()
Francesco Farina ()

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Abstract

The interest around the functional distribution has gained a new momentum since the late 1980s with new theoretical advances of Neo Classical economics and with the contemporary large swing in favour of capital incomes that characterized most European countries. This paper revises the theoretical literature on the interplay between factor shares and economic growth, and it describes the competing evidence around the determinants of the large and enduring fall in the labour share experienced in Europe. The literature has produced a shared consensus on the determinants of the wage push in the 1970s and on the decline of the labour share in the 1980s, but there is still a unsettled debate on the reasons for the enduring decline over the 1990s. The paper also focuses on the possible impact of this significant change in the functional distribution of income on the interpersonal income inequality, evidencing the role in this respect of labour market and welfare institutions.

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Paper provided by Department of Economic Policy, Finance and Development (DEPFID), University of Siena in its series Department of Economic Policy, Finance and Development (DEPFID) University of Siena with number 005.

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Date of creation: Sep 2007
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Handle: RePEc:usi:depfid:005

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Related research
Keywords: factor shares income inequality welfare system.

Find related papers by JEL classification:
D33 - Microeconomics - - Distribution - - - Factor Income Distribution
E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth
E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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