Getting income shares right in agriculture

ABSTRACT

Most economic studies assume that factor shares are constant across countries and sectors. This article calculates factor shares in the agricultural sector across all US states and shows that there are huge differences, which can be explained by crop composition. In states that focus on more labour-intensive crops, such as fruits, the share of income going to labour is larger than in grain-growing states.

KEYWORDS:

• Factor shares
• agriculture
• productivity gaps

JEL CLASSIFICATION:

• O11
• O13

Acknowledgment

I would like to thank Joseph Kabosky and Todd Schoellman for their comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ Conducting the same analysis for other years delivers results that are almost identical to those reported later.

² Excluding some such vegetables, for example, potatoes, has negligible effect on the results.

³ The huge differences between labour shares are preserved if I include intermediate inputs. In this extended version in California and Florida, the share of labour is around and in both Dakotas it is around .

⁴ Some other studies such as Herrendorf and Schoellman (2015) and Cai and Pandey (2015) argue that at least some part of AGPs are caused by measurement issues.

⁵ It should be mentioned that Gollin, Lagakos, and Waugh (2014) also cite this study but they overreport labour share figures for advanced countries.