Confused about Question E, here are the questions and my working copy.
3C. Yes. As is shown in the chart, from 19 2020, the growth rate and labor compensation are very similar. Each factor of production is paid its marginal contribution to the production process. The real wage paid to each worker equals MPL Labor income/GDP + 0.66 Q 0.65 0.64 0.63 O 0.62 0.61 0.6 0.59 Plot Area 0.58 Year from 1970-2020 0.57 O O- 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 3d.o 3e. Is there any connection between your comments in part (c) and this graph? - What does this graph imply about the amount of income attributed to capital? - Do you think it is correct to attribute all of Proprietors' income to payment to labor? - Do these findings have any implications for income inequality? - Does the Labor Share of income exhibit any trend(s) recently 1. Yes, the ratio of Labor income and GDP have a small fluctuation over time, which means the growth rate of labor compensation and GDP are very similar. Since each worker is paid on its contribution, MPL equals the output per worker. 5. the labor share of income increases dramatically in recent years.3. This question studies how labor income has evolved over the past 50 years relative to GDP. a) Go to FRED and find the following data series: " Gross Domestic Product (FRED Code GDP) " Compensation of employees (FRED Code W209RC1). We will call this 'Labor Compensation.' For convenience, work only with annual frequencies and choose "Average" for the aggregation method. b) Construct a table like the one below. Compute the annual growth rates of GDP and Labor Compensation by decade and for the entire period and fill in the blank cells in your table. 1970- 1980- 1990- 2000- 2010- 1970- 1980 1990 2000 2010 2020 2020 Growth Rate of GDP Growth Rate of Labor Compensation c) Are these data consistent with the idea (presented in our lectures) that the marginal product of labor should grow at a similar rate than output per worker? Why or why not? Explain briefly.d) Go to FRED and download the following data: " Proprietors' income with inventory valuation and capital consumption adjustments: Nonfarm (FRED Code A045RC1A027NBEA), " Proprietors' income with inventory valuation and capital consumption adjustments: Farm (FRED Code B042RC1A027NBEA). Assume that Labor Compensation and these two measures of Proprietors' Income account for all income attributed to labor. Construct a graph of "Labor's Share of Income" (that is, labor income divided by GDP) showing its evolution between 1970 and 2020. e) Write a brief report describing what we see in the graph you plotted in (d). In your report, address the following: - Is there any connection between your comments in part (c) and this graph? - What does this graph imply about the amount of income attributed to capital? - Do you think it is correct to attribute all of Proprietors' income to payment to labor? - Do these findings have any implications for income inequality? - Does the Labor Share of income exhibit any trend(s) recently
