Labor share

The wage share can be defined in various ways, but empirically it is usually defined as total labor compensation or labor costs over nominal GDP or gross value added. Piketty defined the wage share as 1 − α. Because the self-employed perform labor which is not rewarded with wages, the labor share may be underestimated in sectors with a high rate of self-employment. One approach is to assume the labor share of proprietors' income to be fixed. The OECD and the Bureau of Labor Statistics adjust labor compensation by assuming that the self-employed have the same average wage as employees in the same sector. ==History==

The importance of the distribution of income between the factors of production – capital, land and labor – has long been recognized. Ricardo (1817) said that to determine the laws which regulate this distribution is the "principal problem in political economy". Cobb and Douglas's Theory of Production (1928) introduced empirically determined constants α and β which corresponded to the capital and labor share respectively. Cobb and Douglas found that the wage share was about 75% in 1928. and Bureau of Economic Analysis. relative to 1948; comparing time series from the Bureau of Labor Statistics and Bureau of Economic Analysis. ==See also==