<p>How would I go about testing econometrically whether each factor of production is actually paid its marginal revenue product in an industry over time, or is paid more or less than that amount? Please make realistic assumptions about availability of data, particularly with regards to physical quantities (as opposed to dollar purchases). For instance, we usually have labor in person-hours, but I think q there is typically no way of measuring physical quantities of diverse capital inputs (unless there is a way of doing so with, e.g. some composite index of capital input price. And if so, how?).</p>
<p>This question is motivated in part by wondering if changes in factor shares over time are caused by parallel changes in marginal revenue product for those factors.</p>

CC BY-SA 4.0
2023-06-20T03:36:37.303Z
Capital can be measured in money units. The price of capital $r$ then would be the interest rate, the $\%$ of the good’s value that the owner receives for renting it.
Nicolas Torres
CC BY-SA 4.0
2023-06-22T07:17:31.977Z
You ask for many nontrivial things. Estimating production functions is hard (I have some notes at the bottom of this page, https://sites.google.com/view/michael-gmeiner/teaching ). Getting data on quantities of inputs, wage bills, and prices of intermediate inputs is hard because data are typically restricted-use to protect the company's privacy. For example, the US Census of Manufacturers takes a multi-year application process to get data. 

What is your goal? Is this for an undergraduate class? Personal interest? Work-related?
Michael Gmeiner
CC BY-SA 4.0
2023-06-22T11:36:36.487Z
This is a paper that quantifies the extent to which labourers are not paid their marginal product, https://www.aeaweb.org/articles?id=10.1257/aer.20200025
Michael Gmeiner
<microeconomics><econometrics><factor-shares><income-distribution>
How can I test whether factors of production are actually paid their marginal revenue product, or more or less?
andrewH
# How can I test whether factors of production are actually paid their marginal revenue product, or more or less?

(Asked by: username_0 on 2023-06-19)

How would I go about testing econometrically whether each factor of production is actually paid its marginal revenue product in an industry over time, or is paid more or less than that amount? Please make realistic assumptions about availability of data, particularly with regards to physical quantities (as opposed to dollar purchases). For instance, we usually have labor in person-hours, but I think q there is typically no way of measuring physical quantities of diverse capital inputs (unless there is a way of doing so with, e.g. some composite index of capital input price. And if so, how?).

This question is motivated in part by wondering if changes in factor shares over time are caused by parallel changes in marginal revenue product for those factors.

**Tags:** microeconomics, econometrics, factor-shares, income-distribution

> **Comments:**
> **username_1**: Capital can be measured in money units. The price of capital $r$ then would be the interest rate, the $\%$ of the good’s value that the owner receives for renting it.  
> **username_2**: You ask for many nontrivial things. Estimating production functions is hard (I have some notes at the bottom of this page, https://sites.google.com/view/michael-gmeiner/teaching ). Getting data on quantities of inputs, wage bills, and prices of intermediate inputs is hard because data are typically restricted-use to protect the company's privacy. For example, the US Census of Manufacturers takes a multi-year application process to get data.   What is your goal? Is this for an undergraduate class? Personal interest? Work-related?  
> **username_2**: This is a paper that quantifies the extent to which labourers are not paid their marginal product, https://www.aeaweb.org/articles?id=10.1257/aer.20200025  

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