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Getting Income Shares Right

Douglas Gollin ()

No 2001-11, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: Many widely used economic models implicitly assume that income shares should be identical across time and space. Although time series data from industrial countries appear consistent with this notion, cross-section data generally appear to contradict the assumption of constant income shares. A commonly used calculation suggests that labor shares of national income vary from about 0.05 to about 0.80 in international cross-section data. This paper suggests, however, that this widely used approach underestimates the labor income of the self-employed and other proprietors. Several adjustments for calculating labor shares are identified and compared. All of them yield data that appear broadly consistent with the hypothesis that labor shares for most countries fall in the range of 0.65 to 0.80

Keywords: self employment; factor shares; income shares; labor shares (search for similar items in EconPapers)
JEL-codes: E25 O47 E13 (search for similar items in EconPapers)
Date: 2001-05
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Published in Journal of Political Economy, April 2002, v. 110, iss. 2, pp. 458-74

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