The distribution of output in integrated economies: theory and evidence
AbstractWe show that in a fully integrated economy, in which there is free mobility of goods and factors, each member’s share of total output will equal its shares of total stocks of productive factors (i.e., physical and human capital). We label this result the equal-share relationship. This relationship also holds in the presence of technological differences or costs of factor mobility among members if outputs or inputs are properly measured to reflect such differences or costs. The equal-share relationship is the limiting distribution of output and factors among members of a fully integrated economy, and it constraints the set of policies that can affect each member’s relative growth within an integrated economy. We empirically examine for the equal-share relationship for alternative economic groups (i.e., US states, EU countries, Developing Countries and a World comprising 55 countries). Our findings indicate that the equal-share relationship holds strongly for US states, holds weakly for EU countries, but does not hold for Developing Countries or the World.
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Bibliographic InfoPaper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2006-32.
Length: 32 pages
Date of creation: 04 Oct 2006
Date of revision:
Distribution of production; economic growth; economic convergence; factor mobility; integrated economy;
Find related papers by JEL classification:
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- F15 - International Economics - - Trade - - - Economic Integration
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-14 (All new papers)
- NEP-CBA-2006-10-14 (Central Banking)
- NEP-MAC-2006-10-14 (Macroeconomics)
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- Harry P. Bowen & Haris Munundar & Jean-Marie Viaene, 2008. "Factor Mobility and the Distribution of Economic Activity in Integrated Economies: Evidence and Implications," European Economy - Economic Papers 315, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
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