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Getting Income Shares Right

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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 of constant income shares. A commonly used calculation suggests that labor shares of national income vary from about 0.05 to about 0.80 in international cross-section data. This paper suggests, however, that this widely used approach underestimates the labor income of the self-employed and other proprietors. Several adjustments for calculating labor shares are identified and compared. All of them yield data that appear broadly consistent with the hypothesis that labor shares for most countries fall in the range of 0.65 to 0.80

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  • Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  • Handle: RePEc:wil:wileco:2001-11
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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.
    2. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 641-680.
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    Keywords

    self employment; factor shares; income shares; labor shares;

    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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