Bowley's law, also known as the law of the constant wage share, is a stylized fact of economics which states that the wage share of a country, i.e., the share of a country's economic output that is given to employees as compensation for their work (usually in the form of wages), remains constant over time.[1] It is named after the EnglisheconomistArthur Bowley. Research conducted near the start of the 21st century, however, found wage share to have declined since the 1980s in most major economies.
The term Bowley's law was first used by Paul Samuelson in 1964 in the sixth American edition of his classic textbook Economics as a name for the stylized fact of a constant wage share.[2] Thereby, Samuelson meant to honor the economist Arthur Bowley, who pioneered the collection and statistical analysis of wage data in the UK. Having already speculated in 1920 that the wage share might be constant and having found (together with Josiah Stamp) evidence for his speculation in a comparison between the UK's wage shares in 1911 and 1924, Bowley became the first to clearly assert the constancy of the wage share in his 1937 book Wages and Income in the United Kingdom since 1860.[3] This finding was remarkably at odds with the teachings of classical economists like Ricardo who perceived the factor shares of land, capital, and labor to be inherently flexible.[4]
Researchedit
Since its beginnings in the 1920s, empirical research on the distribution of factor shares has been intimately tied to the development of national accounting. Due to the necessity of aggregating wage data from different sources, many early studies on the growth or decline of the wage share, including Bowley's and Kalecki's research in the 1930s, were fraught with measurement and comparability issues. As national accounting in Great Britain and the United States improved, studies such as Phelps-Brown and Weber (1953) or Johnson (1954) found wage shares to be constant.[5][6] As a consequence, the constancy of the wage share was widely accepted as stylized fact among economists, e.g. becoming part of Kaldor's facts on modern economic growth.[7] This consensus met strong empirical challenges in the late 1950s, e.g. from Kuznets (1959) or Solow (1959).[8][9] Even though academic interest in Bowley's law waned from the 1960s on, its impact on economic theory was profound. Through its influence on the macroeconomic research of Kalecki and Keynes, it influenced Post-Keynesian economists like Joan Robinson who developed macroeconomic theories able to account for the existence of a constant wage share. Analogously, Bowley's law is reflected in the development of neoclassical wage theory by John Hicks and Paul Douglas in the 1930s. Perhaps most importantly, the inclusion of Bowley's law as one of Kaldor's facts, which neoclassical macroeconomics seek to explain, implies that it considerably shaped the development of modern economic theory.[10]
Only in the early 2000s did academic interest in Bowley's law begin to resurface.[11][12] Since then a substantial body of economic research has cast strong doubts on whether Bowley's law holds in post-1960 data.[13][14][15][16] More specifically, recent research strongly suggests that in most major economies, including the U.S., the wage share has substantially and significantly declined since the 1980s.
Referencesedit
^Krämer, H. M. (2011). "Bowley's Law: The Diffusion of an Empirical Supposition into Economic Theory". Cahiers d'Économie Politique/Papers in Political Economy. 61 (2): 19–49 [p. 20]. doi:10.3917/cep.061.0019. JSTOR 43107795.
^Samuelson, P. (1964). Economics: An Introductory Textbook. New York: McGraw-Hill. p. 736.
^Carter, S. (2007). "Real wage productivity elasticity across advanced economies, 1963–1996". Journal of Post Keynesian Economics. 29 (4): 573–600 [p. 580]. doi:10.2753/PKE0160-3477290403. S2CID 154904142.
^Krämer, H. M. (2011). "Bowley's Law: The Diffusion of an Empirical Supposition into Economic Theory". Cahiers d'Économie Politique/Papers in Political Economy. 61 (2): 19–49 [p. 25]. doi:10.3917/cep.061.0019. JSTOR 43107795.
^Phelps Brown, E. H.; Weber, B. (1953). "Accumulation, Productivity, and Distribution in the British Economy, 1870–1938". Quarterly Journal of Economics. 63 (250): 263–288. doi:10.2307/2227124. JSTOR 2227124.
^Johnson, D. G. (1954). "The Functional Distribution of Income in the United States, 1850–1952". Review of Economics and Statistics. 36 (2): 175–182. doi:10.2307/1924668. JSTOR 1924668.
^Kaldor, N. (1957). "A Model of Economic Growth". The Economic Journal. 268 (67): 591–624. doi:10.2307/2227704. JSTOR 2227704.
^Kuznets, S. (1959). "Quantitative Aspects of the Economic Growth of Nations: IV. Distribution of National Income by Factor Shares". Economic Development and Cultural Change. 7 (3 Part 2): 1–100. doi:10.1086/449811. JSTOR 1151715. S2CID 154604869.
^Solow, R. M. (1958). "A Skeptical Note on the Constancy of Relative Factor Shares". American Economic Review. 48 (4): 618–631. JSTOR 1808271.
^Krämer, H. M. (2011). "Bowley's Law: The Diffusion of an Empirical Supposition into Economic Theory". Cahiers d'Économie Politique/Papers in Political Economy. 61 (2): 19–49 [p. 27]. doi:10.3917/cep.061.0019. JSTOR 43107795.
^Gollin, D. (2008). "Labour's share of income". In Durlauf, S. B.; Blume, L. E. (eds.). The New Palgrave Dictionary of Economics (2nd ed.).
^Bentolila, S.; Saint-Paul, G. (2003). "Explaining Movements in the Labor Share". Contributions to Macroeconomics. 3 (1): 1–31. doi:10.2202/1534-6005.1103. hdl:10230/343. S2CID 155054474.
^Guscina, A. (2006). "Effects of Globalization on Labor's Share in National Income". IMF Staff Papers. 06 (294): 1. doi:10.5089/9781451865547.001. SSRN 956758.
^Elsby, M. W. L.; et al. (2013). "The Decline of the U.S. Labor Share". Brookings Papers on Economic Activity. 47 (2): 1–63. doi:10.1353/eca.2013.0016. hdl:20.500.11820/33fb6813-7bf1-4c77-a9c9-885a07b7fae4. S2CID 154352931.
^Karabournis, L.; Neiman, B. (2014). "The Global Decline of the Labor Share". Quarterly Journal of Economics. 129 (1): 61–103. CiteSeerX10.1.1.649.273. doi:10.1093/qje/qjt032.
Sourcesedit
Bowley, A. L. (1900). Wages in the United Kingdom in the Nineteenth Century: Notes for the Use of Students of Social and Economic Questions. Cambridge, UK: Cambridge University Press.
Bowley, A. L. (1937). Wages and Income in the United Kingdom Since 1860. Cambridge: Cambridge University Press.
January 01, 1970
bowley, also, known, constant, wage, share, stylized, fact, economics, which, states, that, wage, share, country, share, country, economic, output, that, given, employees, compensation, their, work, usually, form, wages, remains, constant, over, time, named, a. Bowley s law also known as the law of the constant wage share is a stylized fact of economics which states that the wage share of a country i e the share of a country s economic output that is given to employees as compensation for their work usually in the form of wages remains constant over time 1 It is named after the English economist Arthur Bowley Research conducted near the start of the 21st century however found wage share to have declined since the 1980s in most major economies Contents 1 Origins 2 Research 3 References 4 SourcesOrigins editThe term Bowley s law was first used by Paul Samuelson in 1964 in the sixth American edition of his classic textbook Economics as a name for the stylized fact of a constant wage share 2 Thereby Samuelson meant to honor the economist Arthur Bowley who pioneered the collection and statistical analysis of wage data in the UK Having already speculated in 1920 that the wage share might be constant and having found together with Josiah Stamp evidence for his speculation in a comparison between the UK s wage shares in 1911 and 1924 Bowley became the first to clearly assert the constancy of the wage share in his 1937 book Wages and Income in the United Kingdom since 1860 3 This finding was remarkably at odds with the teachings of classical economists like Ricardo who perceived the factor shares of land capital and labor to be inherently flexible 4 Research editSince its beginnings in the 1920s empirical research on the distribution of factor shares has been intimately tied to the development of national accounting Due to the necessity of aggregating wage data from different sources many early studies on the growth or decline of the wage share including Bowley s and Kalecki s research in the 1930s were fraught with measurement and comparability issues As national accounting in Great Britain and the United States improved studies such as Phelps Brown and Weber 1953 or Johnson 1954 found wage shares to be constant 5 6 As a consequence the constancy of the wage share was widely accepted as stylized fact among economists e g becoming part of Kaldor s facts on modern economic growth 7 This consensus met strong empirical challenges in the late 1950s e g from Kuznets 1959 or Solow 1959 8 9 Even though academic interest in Bowley s law waned from the 1960s on its impact on economic theory was profound Through its influence on the macroeconomic research of Kalecki and Keynes it influenced Post Keynesian economists like Joan Robinson who developed macroeconomic theories able to account for the existence of a constant wage share Analogously Bowley s law is reflected in the development of neoclassical wage theory by John Hicks and Paul Douglas in the 1930s Perhaps most importantly the inclusion of Bowley s law as one of Kaldor s facts which neoclassical macroeconomics seek to explain implies that it considerably shaped the development of modern economic theory 10 Only in the early 2000s did academic interest in Bowley s law begin to resurface 11 12 Since then a substantial body of economic research has cast strong doubts on whether Bowley s law holds in post 1960 data 13 14 15 16 More specifically recent research strongly suggests that in most major economies including the U S the wage share has substantially and significantly declined since the 1980s References edit Kramer H M 2011 Bowley s Law The Diffusion of an Empirical Supposition into Economic Theory Cahiers d Economie Politique Papers in Political Economy 61 2 19 49 p 20 doi 10 3917 cep 061 0019 JSTOR 43107795 Samuelson P 1964 Economics An Introductory Textbook New York McGraw Hill p 736 Carter S 2007 Real wage productivity elasticity across advanced economies 1963 1996 Journal of Post Keynesian Economics 29 4 573 600 p 580 doi 10 2753 PKE0160 3477290403 S2CID 154904142 Kramer H M 2011 Bowley s Law The Diffusion of an Empirical Supposition into Economic Theory Cahiers d Economie Politique Papers in Political Economy 61 2 19 49 p 25 doi 10 3917 cep 061 0019 JSTOR 43107795 Phelps Brown E H Weber B 1953 Accumulation Productivity and Distribution in the British Economy 1870 1938 Quarterly Journal of Economics 63 250 263 288 doi 10 2307 2227124 JSTOR 2227124 Johnson D G 1954 The Functional Distribution of Income in the United States 1850 1952 Review of Economics and Statistics 36 2 175 182 doi 10 2307 1924668 JSTOR 1924668 Kaldor N 1957 A Model of Economic Growth The Economic Journal 268 67 591 624 doi 10 2307 2227704 JSTOR 2227704 Kuznets S 1959 Quantitative Aspects of the Economic Growth of Nations IV Distribution of National Income by Factor Shares Economic Development and Cultural Change 7 3 Part 2 1 100 doi 10 1086 449811 JSTOR 1151715 S2CID 154604869 Solow R M 1958 A Skeptical Note on the Constancy of Relative Factor Shares American Economic Review 48 4 618 631 JSTOR 1808271 Kramer H M 2011 Bowley s Law The Diffusion of an Empirical Supposition into Economic Theory Cahiers d Economie Politique Papers in Political Economy 61 2 19 49 p 27 doi 10 3917 cep 061 0019 JSTOR 43107795 Gollin D 2002 Getting Income Shares Right Journal of Political Economy 110 2 458 474 doi 10 1086 338747 S2CID 55836142 Gollin D 2008 Labour s share of income In Durlauf S B Blume L E eds The New Palgrave Dictionary of Economics 2nd ed Bentolila S Saint Paul G 2003 Explaining Movements in the Labor Share Contributions to Macroeconomics 3 1 1 31 doi 10 2202 1534 6005 1103 hdl 10230 343 S2CID 155054474 Guscina A 2006 Effects of Globalization on Labor s Share in National Income IMF Staff Papers 06 294 1 doi 10 5089 9781451865547 001 SSRN 956758 Elsby M W L et al 2013 The Decline of the U S Labor Share Brookings Papers on Economic Activity 47 2 1 63 doi 10 1353 eca 2013 0016 hdl 20 500 11820 33fb6813 7bf1 4c77 a9c9 885a07b7fae4 S2CID 154352931 Karabournis L Neiman B 2014 The Global Decline of the Labor Share Quarterly Journal of Economics 129 1 61 103 CiteSeerX 10 1 1 649 273 doi 10 1093 qje qjt032 Sources editBowley A L 1900 Wages in the United Kingdom in the Nineteenth Century Notes for the Use of Students of Social and Economic Questions Cambridge UK Cambridge University Press Bowley A L 1937 Wages and Income in the United Kingdom Since 1860 Cambridge Cambridge University Press Retrieved from https en wikipedia org w index php title Bowley 27s law amp oldid 1222273007, wikipedia, wiki, book, books, library,
