Determinants of the Changes in the Relative Factor Share

ANY attempts have been made to assess the relevant forces affecting the variation of the relative factor share since the monumental work of Hicks, The Theory of Wages. Some of the outstanding research on this subject has been conducted by Murray Brown and his associates [1, 2, 3]. Their analyses have been based on the Schumpeterian idea of discrete technological changes and on Hicksian propositions contained in [6]. Although the assumption of discrete technological changes facilitates the assessment of the impact of nonneutral technological changes as well as other forces, the reality of the assumption is questionable, particularly at the aggregate level of economy. In the present study, technological changes are regarded as continuous instead of discrete. Furthermore, technological changes are classified as factor augmenting and nonfactor augmenting, the rates of which follow exponential time paths. The former arise from the increases in education and training, improved health, and research and development, whereas the latter arise from managerial and organizational improvements. The production function system which includes a CES production function and the marginal productivity relations are used as the bases on which the subsequent model is derived. The model is applied to the selected manufacturing industries in the United States for the period 1947-1963

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