Technology, Trade, and Income Distribution in West Germany: A Factor-Share Analysis, 1976-1994

This paper examines the determinants of functional income distribution in West Germany. The approach is to estimate a complete system of factor share equations for low-skilled labor, high-skilled labor, capital, energy, and materials, taking account of biased technological progress and increasing trade-orientation. Technological progress is found to reduce the share of low-skilled labor and to raise the share of high-skilled labor. The effect of technology bias on the two labor shares is enhanced by substitution of intermediate inputs for lowskilled labor, which is almost absent in the case of high-skilled labor. Trade-induced changes in the composition of aggregate output tend to mitigate these effects, due to the relatively favorable export performance of low-skill intensive industries. The year-to-year variation in the low-skilled share can be attributed to input prices, biased technological progress, and trade-induced structural change in the proportion 19:77:4. For high-skilled labor and capital, the output composition effect of trade contributes about one percent. The results are robust across several specifications examined.

Issue Date:
Publication Type:
Journal Article
DOI and Other Identifiers:
Print ISSN 1514-0326 (Other)
Online ISSN 1667-6726 (Other)
PURL Identifier:
Published in:
Journal of Applied Economics, Volume 8, Number 2
Page range:
Total Pages:
JEL Codes:
D33; F16; O30

 Record created 2017-04-01, last modified 2017-04-04

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