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Transitional dynamics of output and factor income shares: lessons from East Germany

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  • Simona E. Cociuba

Abstract

I evaluate the quantitative implications of technology change and government policies for output and factor income shares during East Germany's transition since 1990. I model an economy that gains access to a high productivity technology embodied in new plants. As existing low productivity plants decrease production, the capital income share varies due to variation in the profit share of these plants. Two policies - transfers and government-mandated wage increases - have opposite effects on output growth, but both contribute to reducing the capital share during the transition. The model's output and capital share line up with counterparts in East German data.

Suggested Citation

  • Simona E. Cociuba, 2010. "Transitional dynamics of output and factor income shares: lessons from East Germany," Globalization Institute Working Papers 43, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:43
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    File URL: http://dallasfed.org/assets/documents/institute/wpapers/2010/0043.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Factor Shares in Transition
      by Agent Continuum in Agent Continuum on 2010-02-08 21:06:47

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    Cited by:

    1. Knobel, Alexander, 2013. "The risks of fiscal policy in countries rich in natural resources," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 29-38, October.

    More about this item

    Keywords

    Income distribution; Economic development; Technology - Economic aspects; Productivity; Capital investments; Wages;
    All these keywords.

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