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Functional Income Distribution and Its Role in Explaining Inequality

Author

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  • Maura Francese
  • Mr. Carlos Mulas-Granados

Abstract

This paper is motivated by two parallel trends: the declining labor share of income and increasing inequality. Micro and macroeconomic data, covering up to 93 countries between 1970 and 2013, are used to assess whether the declining labor share of income has been a key factor driving growing inequality. The major conclusion is that changes in income inequality across a wide range of countries have been driven significantly by changes in the inequality of wages, while the distribution of income between labor and capital has not been a major factor.

Suggested Citation

  • Maura Francese & Mr. Carlos Mulas-Granados, 2015. "Functional Income Distribution and Its Role in Explaining Inequality," IMF Working Papers 2015/244, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/244
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    References listed on IDEAS

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    Cited by:

    1. Marco Ranaldi, 2022. "Income Composition Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(1), pages 139-160, March.
    2. Bom, Pedro R.D. & Erauskin, Iñaki, 2022. "Productive government investment and the labor share," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 347-363.
    3. Björn Döhring & Atanas Hristov & Christoph Maier & Werner Roeger & Anna Thum-Thysen, 2021. "COVID-19 acceleration in digitalisation, aggregate productivity growth and the functional income distribution," International Economics and Economic Policy, Springer, vol. 18(3), pages 571-604, July.
    4. A Heise, 2020. "Wage-led and profit-led regime research – promising scientific research programme or scientific cul-de-sac?," Economic Issues Journal Articles, Economic Issues, vol. 25(2), pages 31-49, September.
    5. Luca Giangregorio & Davide Villani, 2023. "Income inequality, top shares of income and social classes in the 21st century," JRC Working Papers on Social Classes in the Digital Age 2023-05, Joint Research Centre.
    6. Petra Sauer & Narasimha D. Rao & Shonali Pachauri, 2020. "Explaining income inequality trends: An integrated approach," WIDER Working Paper Series wp-2020-65, World Institute for Development Economic Research (UNU-WIDER).
    7. Bruno Bises & Francesco Bloise & Antonio Scialà, 2024. "Labor share as an "automatic stabilizer" of income inequality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 511-532, April.
    8. Ehsan Latif, 2017. "The Relationship between Intergenerational Educational Mobility and Public Spending: Evidence from Canada," Economic Papers, The Economic Society of Australia, vol. 36(3), pages 335-350, September.
    9. Matthew Rognlie & Adrien Auclert, 2016. "Inequality and Aggregate Demand," 2016 Meeting Papers 1353, Society for Economic Dynamics.
    10. Nokulunga Mbona, 2022. "Impacts of Overall Financial Development, Access and Depth on Income Inequality," Economies, MDPI, vol. 10(5), pages 1-23, May.
    11. Valeria Cirillo & Marcella Corsi & Carlo D’Ippoliti & Lucio Gobbi, 2024. "Asymmetric effects of macro policies on women’s and men’s incomes. An empirical investigation of the eurozone crisis in a gender perspective," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(2), pages 327-359, July.
    12. Luis Monroy‐Gómez‐Franco & Paloma Villagómez‐Ornelas, 2024. "Stratification economics in the land of persistent inequalities," American Journal of Economics and Sociology, Wiley Blackwell, vol. 83(1), pages 157-175, January.
    13. Marco Ranaldi, 2016. "On the Measurement of Functional Income Distribution," Documents de travail du Centre d'Economie de la Sorbonne 16051rrr, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Oct 2018.
    14. Tassos Giannitsis & Stavros Zografakis, 2018. "Crisis management in Greece," IMK Studies 58-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    15. Ranaldi, Marco, 2024. "Compositional Inequality: Measurement, Stylized Facts, and Normative Aspects," SocArXiv 75ghp, Center for Open Science.
    16. Ignacio Flores, 2021. "The capital share and income inequality: Increasing gaps between micro and macro-data," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(4), pages 685-706, December.
    17. Marco Ranaldi, 2018. "On the Measurement of Functional Income Distribution," Post-Print halshs-01379229, HAL.
    18. Ranaldi, Marco, 2020. "Income Composition Inequality," SocArXiv 365ct_v1, Center for Open Science.
    19. Declan Trott & Leo Vance, 2018. "Adjusting the Australian Labour Share for Depreciation, Housing and Other Factors, 1960–2016," Economic Papers, The Economic Society of Australia, vol. 37(4), pages 412-428, December.
    20. Anita Szymańska & Małgorzata Zielenkiewicz, 2022. "Declining Labour Income Share and Personal Income Inequality in Advanced Countries," Sustainability, MDPI, vol. 14(15), pages 1-14, August.
    21. Carlos Góes, 2016. "Testing Piketty’s Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics," IMF Working Papers 2016/160, International Monetary Fund.
    22. Bianca VEZENTAN & Olimpia NEAGU, 2023. "The Labour Share In Households’ Income Inequality In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 32(1), pages 297-312, July.

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