Functional Income Distribution and Its Role in Explaining Inequality
34 Pages Posted: 3 Feb 2016
Date Written: November 2015
This paper is motivated by two parallel trends: the declining labor share of income and increasing inequality. Micro and macroeconomic data, covering up to 93 countries between 1970 and 2013, are used to assess whether the declining labor share of income has been a key factor driving growing inequality. The major conclusion is that changes in income inequality across a wide range of countries have been driven significantly by changes in the inequality of wages, while the distribution of income between labor and capital has not been a major factor.
Keywords: inequality, distribution, factor income distribution, wage share, income, gini index, income inequality, labor income, Personal Income and Wealth Distribution, General, All Countries,
JEL Classification: D33, J30, D31
Suggested Citation: Suggested Citation