Behaviour of income shares in a developing economy - the Indian experience

Abstract

This paper makes an attempt to analyze the behaviour of relative factor shares in an underdeveloped country passing through the early stages of rapid economic development. The main purpose of the analysis is to advance some broad hypotheses regarding the pattern of income distribution and the trends in factor shares in a developing economy. The empirical basis of the analysis is provided by the data relating to the Indian economy for the period 1948-49 to 1968-69. The analysis is conducted by dividing the economy into two broad sectors, viz., the agricultural sector and the non-agricultural sector. The main finding of the analysis, which is offered largely in the spirit of a general hypothesis, is that the overall share of labour would be steadily rising in a developing country, though the major factors that account for the rising trend would be essentially different during the different stages of development.