The share of wages in national income and its effects in the short and long run economic activity and growth

Alejandro Rodríguez Arana ()
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Alejandro Rodríguez Arana: Department of Economics, Universidad Iberoamericana, Mexico City. Mexico

Working Papers from Universidad Iberoamericana, Department of Economics

Abstract: This paper sets a model where savings as a ratio of capital depend upon negatively on the share of wages in national income and positively on the rate of interest. The ratio of investment to capital depend upon negatively on both the share of wages the rate of interest. An increase in the share of wages in the short run may have multiple combined effects on capacity utilization and the growth of capital. Adding the concept on normal capacity utilization, a higher share of wages will always have a negative effect on the long run growth of capital.

Date: 2015
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