Author(s): Peter Funk (1997)
Journal: Delta Discussion Paper 97-21
Abstract:
The present article builds on two hypotheses: 1) Productivity growth is uneven across sectors
and 2) Capital, more precisely, durable produced factors of production, are produced in sectors with
relatively high productivity growth. In an otherwise standard model of accumulation and technological progress
it is shown that the share of capital in total income tends to zero in the long-run. This shift in factor-shares
goes hand in hand with a sectorial shift: Employment and expenditure shares are shifted to sectors with low
productivity growth. The conclusions about factor shares contradict the widely accepted stylized fact of a
non-diminishing share of capital income in total income. However, a more disaggregated view on the evolution of
factor shares and the evolution of sectorial shares shows that the conclusions are perfectly compatible with
empirical facts.
[download pdf]