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Recent trends in factor income shares: a global perspective

Author

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  • Alexei Izyumov
  • John Vahaly

Abstract

Purpose - – The purpose of this paper is to provide estimates of factor income shares for 79 developed, developing and transition economies representing close to 90 percent of the world output and to test for income share convergence. Design/methodology/approach - – The paper uses data from the United Nations National Accounts and World Bank World Development Indicator databases and the factor-income-share estimation methodology developed in Bernanke and Gurkaynak (2001) and Gollin (2002). Findings - – The authors estimate indicated that the average levels of capital income (profit) shares in developing and transition countries are 1.4-1.5 times higher than in developed economies. During the period studied, profit shares in all groups of countries trended upwards. As a result, the “global” profit share increased thus extending the “labor share squeeze” of the 1980s and 1990s. Practical implications - – The finding of persistent and significant differences in factor shares in countries of different development levels calls into question the assumption of uniform factor shares’ often made in studies of economic growth. The detection of a broadly based upward trend in profit shares has implications for studies of income distribution and inequality. Originality/value - – The paper's contribution is in providing updated estimates of factor income shares for the broad sample of countries, including in particular transition economies, not covered in previous studies; confirming the positive link between profit share and country's income level; countering claims of factor income convergence and establishing the upward trend in “global” profit share.

Suggested Citation

  • Alexei Izyumov & John Vahaly, 2014. "Recent trends in factor income shares: a global perspective," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 41(5), pages 696-707, September.
  • Handle: RePEc:eme:jespps:v:41:y:2014:i:5:p:696-707
    DOI: 10.1108/JES-12-2012-0174
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    Citations

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    Cited by:

    1. Batóg Jacek, 2017. "Labour Contribution and Productivity in the European Union: A Cluster Analysis," Folia Oeconomica Stetinensia, Sciendo, vol. 17(2), pages 7-18, December.
    2. Trofimov, Ivan D. & Md. Aris, Nazaria & Bin Rosli, Muhammad K. F., 2018. "Macroeconomic Determinants of the Labour Share of Income: Evidence from OECD Economies," MPRA Paper 85597, University Library of Munich, Germany.
    3. Ivan D. TROFIMOV & Nazaria Md. ARIS & Muhammad Khairil Firdaus Bin ROSLI, 2018. "Macroeconomic determinants of the labour share of income: Evidence from OECD economies," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(616), A), pages 25-48, Autumn.
    4. Razgūnė Aušra & Lazutka Romas, 2017. "Labor Share in National Income: Implications in the Baltic Countries," Review of Economic Perspectives, Sciendo, vol. 17(2), pages 121-139, June.

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