Economics: Labor share of Income and Total Productivity Factor

Economics
Name
Course
Instructor
Institution
Date
Q1 Factor prices and income
Cobb–Douglas production function
Y= AKL αL 1-α
Income paid to labor= W/ P*L
Labor share of income= (W/ P*L/)/ Y
(1)W/ P= (1-α) AKL αL -α
(2)Then W/ P= (1-α) Y/ L
1 The labor share of income is (W/ P*L/)/ Y [(1-α) AKL αL –α L]/ L
2 =[(1-α) AKL αL –α L]/ AKL αL –α L
3 =1-α
Q2
National income URL: http://research.stlouisfed.org/fred2/series/A032RC1A027NBEA
National income Compensation of employees: http://research.stlouisfed.org/fred2/series/A033RC1A027NBEA
2.1. What is the average share of income paid to labor in the US?
For the period 1st January 1947 to 1st January 2020
Average share of income paid = average annual national income: compensation of employees/ national income,
0.638345031
2.2. Highest labor share of income
1980
2.3 The labor share of income
= (1622.247/ 2418.625)
= 0.670731097
2.4 Lowest share of income
1948
2.5.The labor share of income
= (144.313/ 244.849)
= 0.589395913
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