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Economic structure and factor payments

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  • Kathryn G. Marshall

Abstract

There is a growing body of evidence that the labour payment share in national income varies across countries and over time, suggesting that the popular aggregate Cobb-Douglas production function may not capture income share dynamics. There remains conflicting evidence on the importance of natural resource rents among low income economies and on estimates of the rate of return to produced capital. This paper focuses on the structural differences among countries, confirming the importance of the agriculture sector in estimates of labour and land's share of factor income based on 81 countries at diverse levels of economic development in the year 2005. I find that cross-country data are best modelled by a CES production function with an elasticity of substitution of 0.8 and that many low income countries have a higher return to capital than the United States.

Suggested Citation

  • Kathryn G. Marshall, 2015. "Economic structure and factor payments," Applied Economics, Taylor & Francis Journals, vol. 47(14), pages 1460-1480, March.
  • Handle: RePEc:taf:applec:v:47:y:2015:i:14:p:1460-1480
    DOI: 10.1080/00036846.2014.997924
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    References listed on IDEAS

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    1. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-356, May.
    2. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    3. Rendall, Michelle, 2013. "Structural Change in Developing Countries: Has it Decreased Gender Inequality?," World Development, Elsevier, vol. 45(C), pages 1-16.
    4. Orley Ashenfelter, 2012. "Comparing Real Wage Rates: Presidential Address," American Economic Review, American Economic Association, vol. 102(2), pages 617-642, April.
    5. Ashenfelter, Orley, 2012. "Comparing Real Wage Rates," IZA Discussion Papers 6500, Institute of Labor Economics (IZA).
    6. repec:pri:indrel:dsp01t435gd01h is not listed on IDEAS
    7. Francesco Caselli & James Feyrer, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 535-568.
    8. Priyo Asad Karim Khan, 2012. "Sector-Specific Capital, Labor Market Distortions and Cross-Country Income Differences: A Two-Sector General Equilibrium Approach," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-52, March.
    9. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
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