Brad Sturgill and coauthor John Dawson recently published an article titled “Market Institutions and Factor Shares Across Countries” in Structural Change and Economic Dynamics. The article utilizes disentangled factor share data to conduct an empirical analysis of the relationship between economic freedom and factor shares based on a four-factor production function. Their findings suggest a positive relationship between market institutions and total labor’s share driven primarily by the underlying human capital component of the labor share. Market institutions are negatively related to total capital’s share and its physical capital component. Economic institutions related to legal structure and security of property rights are central in explaining variation in both labor and capital shares.
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