The relationship between factor shares and economic development

Brad Sturgill ()

Journal of Macroeconomics, 2012, vol. 34, issue 4, 1044-1062

Abstract: The stability of factor shares has long been considered one of the “stylized facts” of macroeconomics. Most factor share studies, however, acknowledge only two factors of production (total capital and total labor), which yields misleading results. I distinguish between reproducible and non-reproducible factors of production. I disentangle physical capital’s share from natural capital’s share and human capital’s share from unskilled labor’s share. Results reveal that non-reproducible factor shares decrease with the stage of economic development, and reproducible factor shares increase with the stage of economic development. This evidence suggests that studies relying on the macroeconomic paradigm of constant factor shares should be revisited. The evidence also supports endogenous growth models that allow technical progress to manifest itself via changes in factor shares.

Keywords: Factor shares; Technological progress; Economic development (search for similar items in EconPapers)
JEL-codes: E25 O11 O30 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:4:p:1044-1062

DOI: 10.1016/j.jmacro.2012.07.005

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