The functional distribution of income: a review of the theoretical literature and of the empirical evidence around its recent pattern in European countries

Simone Bertoli () and Francesco Farina

Department of Economic Policy, Finance and Development (DEPFID) University of Siena from Department of Economic Policy, Finance and Development (DEPFID), University of Siena

Abstract: The interest around the functional distribution has gained a new momentum since the late 1980s with new theoretical advances of Neo Classical economics and with the contemporary large swing in favour of capital incomes that characterized most European countries. This paper revises the theoretical literature on the interplay between factor shares and economic growth, and it describes the competing evidence around the determinants of the large and enduring fall in the labour share experienced in Europe. The literature has produced a shared consensus on the determinants of the wage push in the 1970s and on the decline of the labour share in the 1980s, but there is still a unsettled debate on the reasons for the enduring decline over the 1990s. The paper also focuses on the possible impact of this significant change in the functional distribution of income on the interpersonal income inequality, evidencing the role in this respect of labour market and welfare institutions.

Keywords: factor shares; income inequality; welfare system. (search for similar items in EconPapers)
JEL-codes: D33 E01 E25 J30 O33 (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-eec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:usi:depfid:005

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