Market structure and income shares : testing the kaleckian hypothesis - article ; n°1 ; vol.60, pg 53-69

Cheng-Chung Lai

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Revue d'économie industrielle - Année 1992 - Volume 60 - Numéro 1 - Pages 53-69
The relationship between market structure and income shares is investigated by comparing the empirical research from four industrialized economies and by using 1986 census data to study the case of Taiwan under a dualistic structure framework. In the former, market structure elements seem to favor the share of capital at the expense of labor. In thelatter, industries were divided into (1) export-oriented and domestic-oriented groups, and (2) capital-intensive and labor-intensive groups. The Chow test rejected the two-regime hypothesis for the first group, but confirmed this hypothesis for the second group. Overall, market structure elements had little or no impact on either the whole manufacturing sector or on the two divided groups.
La relation entre la structure du marché et les parts de revenu est analysée en comparant les études empiriques de quatre pays développés avec les données du recensement de 1986 pour Taiwan, dans le cadre d'une structure dualiste. Dans le premier pays, les structures de marché tendent à favoriser la part du capital au détriment de celle du travail. Dans le dernier cas, les industries ont été réparties d'une part selon leur orientation vers l'exportation ou vers le marché domestique et d'autre part selon leur forte intensité en capital ou en travail. Le test effectué permet de rejeter l'hypothèse dans le premier cas, mais le confirme dans le second.
D'une manière générale, les structures de marché ont peu, voire pas, d'influence que ce soit au niveau de l'ensemble de l'industrie manufacturière ou que ce soit au niveau des sous-groupes.
17 pages
Source : Persée ; Ministère de la jeunesse, de l’éducation nationale et de la recherche, Direction de l’enseignement supérieur, Sous-direction des bibliothèques et de la documentation.

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• Publié par: REVUE_D-ECONOMIE_INDUSTRIELLE
• Publié le: 01 janvier 1992
• Nombre de lectures: 16
• Langue: English
• Poids de l'ouvrage: 2 Mo

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Cheng-Chung Lai
Market structure and income shares : testing the kaleckian
hypothesis
In: Revue d'économie industrielle. Vol. 60. 2e trimestre 1992. pp. 53-69.
Abstract
The relationship between market structure and income shares is investigated by comparing the empirical research from four
industrialized economies and by using 1986 census data to study the case of Taiwan under a dualistic structure framework. In the
former, market structure elements seem to favor the share of capital at the expense of labor. In thelatter, industries were divided
into (1) export-oriented and domestic-oriented groups, and (2) capital-intensive and labor-intensive groups. The Chow test
rejected the two-regime hypothesis for the first group, but confirmed this hypothesis for the second group. Overall, market
structure elements had little or no impact on either the whole manufacturing sector or on the two divided groups.
Résumé
La relation entre la structure du marché et les parts de revenu est analysée en comparant les études empiriques de quatre pays
développés avec les données du recensement de 1986 pour Taiwan, dans le cadre d'une structure dualiste. Dans le premier
pays, les structures de marché tendent à favoriser la part du capital au détriment de celle du travail. Dans le dernier cas, les
industries ont été réparties d'une part selon leur orientation vers l'exportation ou vers le marché domestique et d'autre part selon
leur forte intensité en capital ou en travail. Le test effectué permet de rejeter l'hypothèse dans le premier cas, mais le confirme
dans le second.
D'une manière générale, les structures de marché ont peu, voire pas, d'influence que ce soit au niveau de l'ensemble de
l'industrie manufacturière ou que ce soit au niveau des sous-groupes.
Citer ce document / Cite this document :
Lai Cheng-Chung. Market structure and income shares : testing the kaleckian hypothesis. In: Revue d'économie industrielle.
Vol. 60. 2e trimestre 1992. pp. 53-69.
doi : 10.3406/rei.1992.1423
http://www.persee.fr/web/revues/home/prescript/article/rei_0154-3229_1992_num_60_1_1423LAI Cheng-Chung
MARKET STRUCTURE
AND INCOME SHARES :
TESTING THE KALECKIAN HYPOTHESIS
I. — PREVIOUS STUDIES
1.1. The Kaleckian proposition
Income distribution theory in the neo-classical setting is generally based on the
explicit or implicit assumption of perfect market competition. This paradigm is
well illustrated in Ferguson (1969), Bronfenbrenner (1971) and Harry Johnson
(1973). However, economists have been aware of the weak points of this approach.
For example, Sraffa (1926) pointed out that perfect market competition is an unreal
istic description of conditions in most modern industries (1).
To offer an alternative approach, the Polish economist Michal Kalecki
(1910-1970, see Feiwel 1975, Sawyer 1985) introduced Lerner's Degree of Monop
oly into the analysis of income shares in 1938. His basic idea was that the monop
olistic elements in price making (mark-up) deprives workers of a portion of
income, i.e. disfavor wage share in the distribution of national wealth (see Appendix
for a brief theroretical survey).
1.2. International comparison
First the trends of relative shares (profit share and wage share) in four main
developed economies and Taiwan for the period 1960-1984 are presented (Figure
1). Next, evidence of eight case studies is compared (Table 1). Finally, economet
ric results for the case of Taiwan are presented 2).
Trends of relative shares
The stable trends of relative shares in GNP in some advanced economies during
*he past century once puzzled economists. This phenomenon has been called Bow-
ley's Law, or, as Lawrence Klein calls it, one of the five « great ratios of econo
mics ». This stability is now rejected by the long-trend evidence since the Great
Depression of the 1930s and the great inflation that followed it (Bronfenbrenner
1971 : 80-83, Atkinson 1975 : 165-168).
(1) See the criticism of this approach in Blaug (1980 : 194-201). Kriesler (1987) provided detailed info
rmation on the development of Kalecki's micro theory.
REVUE D'ÉCONOMIE INDUSTRIELLE — n° 60, 2e trimestre 1992 53 Figure 1 : Trends of income shares : international comparison (1960-84)
Illustration non autorisée à la diffusion
Illustration non autorisée à la diffusion
Définitions
(1) Wage share : compensation of employees/Gross domestic product in purchasers'value.
(2) Profit : Operating surplus/Gross domestic product in purchasers'value.
Sources :
1) For the case of Taiwan : Taiwan Statistical Data Book (1987 :39).
2) For the other countries : United Nations : Yearbook of National Accounts Statistics (1977) and Natio
nal Accounts Statistics (1984).
54 REVUE D'ÉCONOMIE INDUSTRIELLE — n° 60, 2e trimestre 1992 1, with the GNP data for 1960-1984, fails to support the constant share Figure
thesis. For the profit share, France and W. Germany had significantly decreasing
trends ; the UK and US showed a decreasing trend but less dramatically. For Tai
wan, trends were stable in the long run. For wage shares, the UK and US had
relatively stable trends during this period, while W. Germany, France and Tai
wan had significantly increasing wage shares between 1960 and 1975 and remai
ned stable thereafter (2).
Evidence of Industrialized Economies
Regarding the empirical tests of the Kaleckian hypothesis, the relationships bet
ween the elements of market structure and income shares, eight case studies are
compared in Table 1 (France, UK, Germany, USA [5 cases]). Due to limited space,
only the final results are reported.
Three papers are based on the Kaleckian approach. Encaoua and Franck (1982)
examined the effects of market structure variables on the profit/wage ratio, in
particular taking industrial groups into account. Their main conclusions are that
industrial concentration is positively and significantly related to profit share and
that industrial groups have an indirect contribution. Cowling and Molho (1982)
found that concentration, advertising, and investment activities have negative
effects on the shares of workers, whereas other variables have less certain effects.
When salary/VA was tested, market concentration showed a significant effect,
indicating that staff (but not workers) benefitted from monopoly. Henley (1987),
basically a follower of Cowling, obtained similar results (3). Macpherson (1990)
made an extension of Henley's work.
Counter-examples are provided by Feinberg (1983) and Brush and Crane (1984).
In their research, market concentration had an insignificantly negative contribut
ion on profit share, and unions did not influence wage shares. The other studies
in Table 1 observe econometric relationships without specifying their economic
causality in formal models. From Table 1, the dominant impression is that indust
rial concentration has a negative effect on wage share and is positively related
to profit share.
II. — EVIDENCE FROM TAIWAN
2.1. The dualistic structure
A main characterictic of less developed countries (LDC) is their dualistic struc
ture, the co-existence of two regimes in the economy. The key point of the dua-
(2) Actually, the two shares in Figure 1 do not add up to 1 . United Nations' National Accounts Sta
tistics are used to draw this figure. I take the « Compensation of employees » as « wage share »
and « Operating surplus » as « profit share ». There are three other accounts, consumption of
fixed capital, indirect taxes and subsidies. These three accounts cannot be included into both sha
res ; for this reason Figure 1 does not add up to 1. The purpose here is to show the trends of
the first two accounts. This figure is to serve as an illustration, rather than as a justification of
any hypothesis.
(3) Henley published another paper on the share of labor and profit rate in Cambridge Journal of
Economics (December 1987), using another approach different form the Kaleckian one.
REVUE D'ÉCONOMIE INDUSTRIELLE — n° 60, 2e trimestre 1992 55
. à / Table 1 : Determination of profit share and wage share :
an international comparison
r2 Depend, Author(s) t I ndus trial Invest Capital Material Growth Export Import Unions
variable tration groups /output /Labor /wage rate /output /output studies tising !
Encaoua t
prof it Franck (1982):
France: 1974 .6 * * w industrial
sector
w
log -- Cowling t .3 *** **• * VA Kot ho (1982)
UK: 1968,1973
salary manufacturing + + .2 .1. VA
Feinberg - VA-U (1983), y. .3
Germany 1979
VA manufacturing
U Moroney I log-- Allen (1969) various (♦,-)
VA USA: 1969 results ♦.. Advermanufacturing
1983-85 Concen ♦■ U #* ** ** .1
sales Scheps (1981)
USA: 1963-71
u manufacturing
.1 *. .. VA
U - In --- + .3 *• VA Brush I Crane
(198«), USA:
1967, 208 isalary In ndustries + .3 * VA
u Henley (1987)
USA: 1972 .4 *♦# •*• Y manufacturing
72 industries
*** •• W .6 Hacpherson( 1990)
USA: manufactu.
VA 1973-75 4 •*♦ .5
Remark