# Capital share of income solow

##### 2020-02-22 23:10

The income of capital is just the amount of capital times the income per unit of capital; the latter is called the return on capital or the interest rate. Thus the share of income going to capital, $$\alpha$$ the Capital Share of Income is simply the CapitalIncome ratio times the interest rate $$r$$, that is \alphar \fracKYRobert Solows paper (1957) on the sources of growth in the US economy noted that the data for the US economy seemed consistent with a CobbDouglas representation for the aggregate production function, with a capital share of 0. 35 (and thus, implicitly, a labour share of 0. 65). capital share of income solow

2. Capital is accumulated as a result of savings behaviour. Because the technology has the neoclassical form (diminishing returns to per capita capital), capital accumulation cannot raise per capita income forever. This does not depend on the assumption of a constant savings rate. It will happen even if s 1, that is, if people save all of their income. 46 The Solow per capita production function An increase in the stock of capital would increase both output and Q L; we assume that people save 1 4 of output, or what comes to the same thing, 25 cents for every dollar of income. The savings function is therefore: s 0. 25 q. Oct 09, 2012  Plus I show a trick, given any CobbDouglas Production Function with constant returns to scale, how you can look at the production function and find the labor share of income and capital sharecapital share of income solow Assume that an economy described by the Solow model is in a steady state with output and capital growing at 3 percent, and labor growing at 1 percent. The capital share is 0. 3. The growthaccounting equation indicates that the contributions to growth of capital, labor, and total factor productivity are: