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Bowley’S Law: The Diffusion Of An Empirical Supposition Into Economic Theory

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  • Hagen M. Krämer

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Abstract

The share of labour income in national product has declined in many advanced economies over the past 30 years or so. However, many economists are still convinced that the wage share remains more or less constant in the long run. This notion of the long-term relative stability of the wage share is considered to be a stylized fact, or even sometimes referred to as a “law of economics”. This paper attempts to show how the alleged stability of the labour share of income became known as one of the “great magnitudes in economics”. It also shows how this “law” made its way into the three major theories of macroeconomic income distribution, i.e. neoclassical, postKeynesian, and Kaleckian distribution theory. Since the data actually reveal strong fluctuations of aggregate income shares over time, the conclusion has to be drawn that the major macroeconomic theories of growth and distribution are built around an invalid –or at least highly questionable– assumption about the real world.

Suggested Citation

  • Hagen M. Krämer, 2011. "Bowley’S Law: The Diffusion Of An Empirical Supposition Into Economic Theory," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 61, pages 19-50.
  • Handle: RePEc:cpo:journl:y:2011:i:61:p:19-50
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    Cited by:

    1. D., Ivan, 2017. "Stability of the labour shares: evidence from OECD economies," MPRA Paper 79822, University Library of Munich, Germany.

    More about this item

    Keywords

    Aggregate Factor Income Distribution. Wage share. Bowley’s Law. Macroeconomic income distribution theories;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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