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Measuring Factor Income Shares at the Sector Level - A Primer

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  • Herrendorf, Berthold
  • Valentinyi, Akos

Abstract

Many applications in economics use multi-sector versions of the growth model with Cobb--Douglas production functions at the sector level. In this paper, we measure the U.S. income shares of capital and labour for five sectors that encompass the typical sectors used in the literature. We also split the capital shares of these five sectors into the sector income shares of land and of structures and equipment. We find that the factor income shares differ widely across sectors. For example the capital share in agriculture is about twice that in construction. Moreover, the land shares in agriculture and in services are sizeable whereas the land shares in all other sectors are small. Our findings suggest that the general practice of using the economy-wide factor income shares also at the sector level is not a good practice.

Suggested Citation

  • Herrendorf, Berthold & Valentinyi, Akos, 2007. "Measuring Factor Income Shares at the Sector Level - A Primer," CEPR Discussion Papers 6271, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6271
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    Cited by:

    1. Klaus Desmet & Esteban Rossi-Hansberg, 2014. "Spatial Development," American Economic Review, American Economic Association, vol. 104(4), pages 1211-1243, April.
    2. Rubini, Loris, 2009. "Innovation and the Elasticity of Trade Volumes to Tariff Reductions," MPRA Paper 21484, University Library of Munich, Germany.
    3. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
    4. Semko Roman, 2013. "Optimal economic policy and oil prices shocks in Russia," EERC Working Paper Series 13/03e, EERC Research Network, Russia and CIS.
    5. Berthold Herrendorf & Richard Rogerson & ?kos Valentinyi, 2013. "Two Perspectives on Preferences and Structural Transformation," American Economic Review, American Economic Association, vol. 103(7), pages 2752-2789, December.
    6. Stefano Eusepi & Bart Hobijn & Andrea Tambalotti, 2011. "CONDI: A Cost-of-Nominal-Distortions Index," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 53-91, July.
    7. David Albouy, 2009. "What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values," NBER Working Papers 14981, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Industry-by-commodity total requirement matrix; Input-output tables; Sector factor shares;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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