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Getting Income Shares Right

Douglas Gollin
Journal of Political Economy
Vol. 110, No. 2 (April 2002), pp. 458-474
DOI: 10.1086/338747
Stable URL: http://www.jstor.org/stable/10.1086/338747
Page Count: 17
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Getting Income Shares Right
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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. A commonly used calculation suggests that labor shares of national income vary from about .05 to about .80 in international cross‐section data. This paper suggests that the usual approach underestimates labor income in small firms. Several adjustments for calculating labor shares are identified and compared. They all yield labor shares for most countries in the range of .65–.80.

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