Factor shares at the sector level, Colombia 1990-2005
In general, empirical studies on economics rely on the assumption of constant capitalshare of income both at the aggregate level and at the sector level. However, there is noempirical evidence supporting the constancy of capital share at the sector level. In thispaper, using Colombian data, we measure capital share for 48 sectors during the period1990-2005. We also explore the relation between capital's share and factor prices andthe behavior of capital share during the business cycle. The main results are thefollowing: (i) capital share is not constant but, rather, has an increasing trend; (ii) capitalshares growth rates positively correlate with sector value-added growth; (iii) the capitalshares behave pro-cyclically; and (iv) there is a positive correlation between capitalshares and real wages and a negative correlation between capital shares and interestrates. These results suggest that the usual assumption of constant factor shares is notaccurate.
|Date of creation:||16 Nov 2009|
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