The distribution of output in integrated economies: theory and evidence

Harry Bowen (), Haris Munandar and Jean-Marie Viaene

Vlerick Leuven Gent Management School Working Paper Series from Vlerick Leuven Gent Management School

Abstract: We show that in a fully integrated economy, in which there is free mobility of goods and factors, each member’s share of total output will equal its shares of total stocks of productive factors (i.e., physical and human capital). We label this result the equal-share relationship. This relationship also holds in the presence of technological differences or costs of factor mobility among members if outputs or inputs are properly measured to reflect such differences or costs. The equal-share relationship is the limiting distribution of output and factors among members of a fully integrated economy, and it constraints the set of policies that can affect each member’s relative growth within an integrated economy. We empirically examine for the equal-share relationship for alternative economic groups (i.e., US states, EU countries, Developing Countries and a World comprising 55 countries). Our findings indicate that the equal-share relationship holds strongly for US states, holds weakly for EU countries, but does not hold for Developing Countries or the World.

Keywords: Distribution of production; economic growth; economic convergence; factor mobility; integrated economy (search for similar items in EconPapers)
JEL-codes: E13 F15 F21 F22 O57 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-10-04
New Economics Papers: this item is included in nep-cba and nep-mac
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