Getting Income Shares Right
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
|Date of creation:||May 2001|
|Date of revision:|
|Publication status:||published in Journal of Political Economy, April 2002, v. 110, iss. 2, pp. 458-74|
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- 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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