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date: 15 December 2019

Abstract and Keywords

This article focuses on the importance of functional distribution in discussions of economic inequality. Section 2 reviews theoretical perspectives on functional distribution while Section 3 discusses measurement issues. The USA is used as a case study to show how levels and trends in factor shares may be affected by measurement choices. The preferred measure of labour's share shows a very shallow inverted U-shaped pattern, peaking in the late 1970s. In Section 4, the more pronounced rise and decline of labour's share in the post-war period observed in the OECD outside the USA is noted, and the influences behind the recent decline in labour's share are surveyed. Section 5 reports longer-term trends in labour's share from early in the 20th century calculated from national sources. The article concludes by drawing attention to the need for more research to uncover the causes of swings in factor shares and to establish the links between the functional and personal distribution of income.

Keywords: economic inequality, factor shares, labour, income distribution, functional distribution, personal distribution

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