Bowley’S Law: The Diffusion Of An Empirical Supposition Into Economic Theory
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.
Volume (Year): (2011)
Issue (Month): 61 ()
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