Labor's Share of Income Measure

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A Labor's Share of Income Measure is a ratio measure for a labor income measure relative to national income measure (often GDP).



References

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2002

  • (Gollin, 2002) ⇒ Douglas Gollin. (2002). “Getting Income Shares Right.” In: Journal of political Economy, 110(2).
    • 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.

1999

  • (Krueger, 1999) ⇒ Alan Krueger. (1999). “labor's share." American Economic Review, Papers and Proceedings, 89(2).
    • ABSTRACT: This paper considers conceptual and practical issues that arise in measuring labor's share of national income. Most importantly: How are workers defined? How is compensation defined? The current definition of labor compensation used the Bureau of Economic Analysis (BEA) includes the salary of business owners and payments to retired workers in labor compensation. An alternative series to the BEA's standard series is presented. In addition, a simple method for decomposing labor compensation into a component due to raw labor' and a component due to human capital is presented. Raw labor's share of national income is estimated using Census and CPS data. The share of national income attributable to raw labor increased from 9.6 percent to 13 percent between 1939 and 1959, remained at 12-13 percent between 1959 and 1979, and fell to 5 percent by 1996.