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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 34, No. 4, pp.547-591
ISSN: 1225-0279 (Print)
Print publication date 30 Nov 2021
Received 10 Aug 2021 Revised 19 Nov 2021 Accepted 19 Nov 2021
DOI: https://doi.org/10.22904/sje.2021.34.4.004

Linear Production Function Based Modeling and Estimations of wages and profits in S. Korean economy: Consequential policies

Elias Sanidas
Elias Sanidas, Retired from full-time professor, Department of Economics. Seoul National University, Kwanakro 1 Kwanak-gu Seoul, 08826, Korea, Tel: +30 697-033-9027 ellass@snu.ac.kr

JEL Classification: Ε10, Ε13, Ε19, Ε24, Ε60, Ε64, Ε69, Ο47, Ο49, Ο53

Abstract

The introduction of productivity, either in the form of a function of labor productivity or a function of wages in a linear production function (LPF), opens numerous possibilities for the correct estimation of the main parameters of capital and labor prices, as well the capital and labor shares in the national economy. The LPF is also successfully combined with the Cobb–Douglas production function to confirm the estimations of these parameters. In addition, we provide evidence as to why the wage share in the economy has been declining. Several other relations are also generated, such as the constancy of the GDP to capital ratio. Moreover, some related policies are examined regarding wages and profits.

Keywords:

economic growth, linear production function, Cobb–Douglas production function, wage, profit, capital share, labor share, constant trends, policies, productivity, panel data

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