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Cobb Douglas: Capital and Labor Shares in the United States

Cobb Douglas: Capital and Labor Shares in the United States. Xavier Sala-i-Martin Columbia University. The COBB-DOUGLAS Production Function.

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Cobb Douglas: Capital and Labor Shares in the United States

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  1. Cobb Douglas:Capital and Labor Shares in the United States Xavier Sala-i-Martin Columbia University

  2. The COBB-DOUGLAS Production Function • The Cobb-Douglas production function is a good approximation to the U.S. Economy because the share of GDP that is appropriated by capitalists is CONSTANT over the long run. In fact, it is fairly close to 30%. • The share appropriated by workers is also constant at about 70%.

  3. Note: • Notice that, over the short run, the shares move a little -for example, the labor share increased a lot during the great depression, as capitalists lost a lot of income, but over the long run, they remain fairly stable.

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