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Sectoral Composition of Output and the Wage Share: a Two-Sector Kaleckian Model

Elton Beqiraj, Lucrezia Fanti and Luca Zamparelli ()

No 3/19, Working Papers from Sapienza University of Rome, DISS

Abstract: This paper looks at structural change as one additional source of decline in the wage share. First, we provide a decomposition of changes in aggregate wage shares into changes due to variations in output composition and in sectoral wage shares for nine OECD countries between 1977 and 2010. We show that the rise in the service sector is a relevant factor in explaining the fall of the wage share, at least for some countries. Next, we develop a two-sector Kaleckian growth model consisting of the service and manufacturing sectors. We assume that structural change is exogenous as it arises from a shift in consumers' preferences or in the saving rate. We show that, when mark-ups are relatively higher in the service sector, a shift in the sectoral composition of demand in favor of the service sector good generates a rise in the profit share.

Keywords: structural change; functional income distribution; manufacturing; service. (search for similar items in EconPapers)
JEL-codes: D33 E11 O14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro, nep-hme, nep-mac, nep-pke and nep-tid
Date: 2019-05
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