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Recent trends in factor income shares: a global perspective

Alexei Izyumov (College of Business, University of Louisville, Louisville, Kentucky, USA)
John Vahaly (College of Business, University of Louisville, Louisville, Kentucky, USA)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 2 September 2014

1027

Abstract

Purpose

The purpose of this paper is to provide estimates of factor income shares for 79 developed, developing and transition economies representing close to 90 percent of the world output and to test for income share convergence.

Design/methodology/approach

The paper uses data from the United Nations National Accounts and World Bank World Development Indicator databases and the factor-income-share estimation methodology developed in Bernanke and Gurkaynak (2001) and Gollin (2002).

Findings

The authors estimate indicated that the average levels of capital income (profit) shares in developing and transition countries are 1.4-1.5 times higher than in developed economies. During the period studied, profit shares in all groups of countries trended upwards. As a result, the “global” profit share increased thus extending the “labor share squeeze” of the 1980s and 1990s.

Practical implications

The finding of persistent and significant differences in factor shares in countries of different development levels calls into question the assumption of uniform factor shares’ often made in studies of economic growth. The detection of a broadly based upward trend in profit shares has implications for studies of income distribution and inequality.

Originality/value

The paper's contribution is in providing updated estimates of factor income shares for the broad sample of countries, including in particular transition economies, not covered in previous studies; confirming the positive link between profit share and country's income level; countering claims of factor income convergence and establishing the upward trend in “global” profit share.

Keywords

Citation

Izyumov, A. and Vahaly, J. (2014), "Recent trends in factor income shares: a global perspective", Journal of Economic Studies, Vol. 41 No. 5, pp. 696-707. https://doi.org/10.1108/JES-12-2012-0174

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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