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Getting Income Shares Right

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  • Douglas Gollin

Abstract

Many widely used economic models implicitly assume that income shares should be identical across time and space. Although time-series data from industrial countries appear consistent with this notion, cross-section data generally appear to contradict the assumption. A commonly used calculation suggests that labor shares of national income vary from about .05 to about .80 in international cross-section data. This paper suggests that the usual approach underestimates labor income in small firms. Several adjustments for calculating labor shares are identified and compared. They all yield labor shares for most countries in the range of .65.80.

Suggested Citation

  • Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    • Handle: RePEc:ucp:jpolec:v:110:y:2002:i:2:p:458-474
    DOI: 10.1086/338747
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    References listed on IDEAS

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    1. Mancur Olson, 1996. "Distinguished Lecture on Economics in Government: Big Bills Left on the Sidewalk: Why Some Nations Are Rich, and Others Poor," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 3-24, Spring.
    2. Alwyn Young, 1994. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," NBER Working Papers 4680, National Bureau of Economic Research, Inc.
    3. Alwyn Young, 2000. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," NBER Working Papers 7856, National Bureau of Economic Research, Inc.
    4. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 641-680.
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    More about this item

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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