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Development and Sector Labor Income Shares

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  • Daniel Schäfer

Abstract

The development accounting literature assumes that sector labor income shares and output per person across countries are not correlated. In this paper, I show that the data reject this assumption for a large set of countries. The labor shares in the manufacturing and the market-services sectors increase significantly more with output per person than in other sectors, leading to a shift of labor income across sectors with economic development. The empirical evidence suggests that capital deepening is the primary driver of these patterns. Researchers can directly use the new dataset of labor shares to calibrate multisector models.

Suggested Citation

  • Daniel Schäfer, 2024. "Development and Sector Labor Income Shares," Economics working papers 2024-05, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2024-05
    Note: English
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    More about this item

    Keywords

    Capital intensity; Economic development; Input-output tables; Multisector models; Sector development accounting;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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