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Getting Income Shares Right: A Panel Data Investigation for OECD Countries

  • Aamer Abu-Qarn

    ()

    (Department of Economics, Ben-Gurion University of the Negev)

  • Suleiman Abu-Bader

    ()

    (Department of Economics, Ben-Gurion University of the Negev)

In this paper we reassess the conventional measure of the capital share in income by estimating the shares of inputs in income for 23 OECD countries for the period 1960-2003 utilizing panel data techniques. A share of physical capital of over 0.50, and not one-third as commonly accepted, is found to be robust to a variety of specifications of the production function and the econometric models used. Additionally, we find that following the first oil shock the share of physical capital dropped while the share of human capital rose. Consequently, using the conventional shares may have led to overstating the severity of the post-1973 productivity slowdown.

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File URL: http://in.bgu.ac.il/en/humsos/Econ/Working/0701.pdf
File Function: First version, 2007
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Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 0701.

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Length: 34 pages
Date of creation: 2007
Date of revision:
Publication status: Published in Economic Development Quarterly as: Abu-Qarn, A. S. and Abu-Bader, S. (2009) “Getting Income Shares Right: A Panel Data Investigation for OECD Countries,” Economic Development Quarterly, 23(3), pages 254-266.
Handle: RePEc:bgu:wpaper:0701
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  1. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  2. Abu-Qarn, Aamer S. & Abu-Bader, Suleiman, 2007. "Sources of Growth Revisited: Evidence from Selected MENA Countries," World Development, Elsevier, vol. 35(5), pages 752-771, May.
  3. James A. Kahn & Robert Rich, 2003. "Tracking the new economy: using growth theory to detect changes in trend productivity," Staff Reports 159, Federal Reserve Bank of New York.
  4. Bruce E. Hansen, 2001. "The New Econometrics of Structural Change: Dating Breaks in U.S. Labour Productivity," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 117-128, Fall.
  5. Samuel Bentolila & Gilles Saint Paul, 1999. "Explaining movements in the labor share," Economics Working Papers 374, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  7. Barro, R. & Mankiw, G., 1992. "Capital Mobility in Neoclassical Models of Growth," Harvard Institute of Economic Research Working Papers 1615, Harvard - Institute of Economic Research.
  8. Renuka Mahadevan, 2003. "To Measure or Not To Measure Total Factor Productivity Growth?," Oxford Development Studies, Taylor & Francis Journals, vol. 31(3), pages 365-378.
  9. Abdelhak Senhadji, 2000. "Sources of Economic Growth: An Extensive Growth Accounting Exercise," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 6.
  10. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
  11. Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
  12. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  13. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
  14. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72 National Bureau of Economic Research, Inc.
  15. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
  16. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 208-262, 05.
  17. Timmer, Marcel P. & Ypma, Gerard & Ark, Bart van der, 2003. "IT in the European Union: driving productivity divergence?," GGDC Research Memorandum 200363, Groningen Growth and Development Centre, University of Groningen.
  18. William Nordhaus, 2004. "Retrospective on the 1970s Productivity Slowdown," NBER Working Papers 10950, National Bureau of Economic Research, Inc.
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