Labour Share Production and the Effect on Economic Growth in Iran

Document Type : Research Paper


1 Professor of Econometrics & Social Statistics, Department of Economics, Semnan University, Semnan-Iran.

2 Ph.D Student, Department of Economics, Higher Institute of Management & Planning, Tehran-Iran.


   The recent economic crisis in Western World has increased the interrelationship importance of production factors share in economic growth. In recent years according to several evidences concerning instability in production, the subject of "functional distribution of income" has found its place. Many analyst considered the relationship between economic growth and inequality from the "personal income distribution" point of views but the effect of labour factor share on economic growth have not received enough attention. In this paper the CES production function is used to analyses the effect of changes in labour production share on economic growth both theoretically and empirically. From the theoretical point of view it is shown that increase in capital production share resulting from decrease in labour share leads to reduction in economic growth rate. On the other hands, in a consumption-based society, increase in capital production share causing interest rate increase, induces reduction in saving rate and this reduces the economic growth rate. Based on empirical study observing Iranian economy during 1370-1390 (1991-2011) does not reject the hypothesis.
JEL Classification: D33, E21, E22, O40, O47


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Volume 51, Issue 1
March 2016
Pages 1-24
  • Receive Date: 02 March 2015
  • Revise Date: 13 August 2015
  • Accept Date: 09 October 2015
  • First Publish Date: 20 March 2016