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Getting Income Shares Right

  • Douglas Gollin

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.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 110 (2002)
Issue (Month): 2 (April)
Pages: 458-474

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Handle: RePEc:ucp:jpolec:v:110:y:2002:i:2:p:458-474
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  1. 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.
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