Abstract

The distribution of national income between the factors of production is a ubiquitous topic in debates on income inequality. Some researchers argue that income inequality is a source of innovation, while others see that excessive income inequality undermines social cohesion and economic growth.
As mentioned in several works, the measurement of the share allocated to the labour factor is underestimated in most countries, especially in developing countries, due to not considering the labour income of the self-employed. In developing countries, self-employment is well over 60%, as a result, measuring labour income based on wage compensation recorded in the national accounts greatly distorts the measurement of inequality linked to income distribution.
The purpose of this article is to present the valuation of the labour income share, and to propose a methodology to adjust the share of national income which is devolved to employees. The approach we are presenting is based on a local reality characterized by the predominance of self-employment, whether in the agricultural sector (87%) or in the informal sector (76%).
Two main strategies are frequently used to adjust the labour income share: the mixed income approach and the self-employment approach. The mixed income approach is based on splitting the income of the self-employed, as measured by the national accounts as mixed income item, between capital and labour. The second adjusts the labour income on the basis of the “compensation of employees” item of national accounts and on the self-employment rate in a given economy.
Our work is based on a combination of the two methods mentioned above, by first estimating the wage remuneration of self-employed workers based on their socio-professional characteristics and then adjusting the estimation to the mixed income, as shown by the supply and use table in the national accounts.
The methodology that we propose fits into the framework of national accounts (SNA 2008), designed at a very detailed level of disaggregation. It consists of estimating a salary for self-employed workers based first on the common characteristics of employees and the self-employed by industry, by formal and informal sector, by profession and by level of qualification. Then data from supply and use table are used to adjust and to increase the reliability of labour share estimation constructed at the aggregate level.
The data set we use covers micro data from labour force survey, informal sector survey, formal enterprises’ survey and the mixed incomes by activity from the national accounts.
We find the labour share in Morocco to be about two-thirds in size and hence equal to the standard in economic literature.