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Estimating Factor Shares from Nonstationary Panel Data

Juan Aquino () and N.R. Ramírez-Rondán ()

No 2017-89, Working Papers from Peruvian Economic Association

Abstract: The measurement of the sources of economic growth is essential for understanding the long-term perspective of any economy. From an empirical viewpoint, the results from any growth-accounting exercise depend both on the functional form that summarizes the technology set and the factor share values. We estimate the physical capital's share in output implied by a Cobb-Douglas production function. Instead of growth rates, we analyze time series in levels to preserve the long-run information contained in the data. We also make use of the cross-section dimension (between countries) to overcome the low availability of long time series. The Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) estimators are used in a panel cointegration framework for 109 countries over the 1951-2014 period. For several measures of labor input, our physical capital's share estimates range between 0.46 and 0.56 for the largest set of countries. Our estimates of the physical capital's share in output vary significantly across regions.

Keywords: production function; factor shares; cointegration; panel data (search for similar items in EconPapers)
JEL-codes: C23 E23 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro
Date: 2017-02
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