INCOME AND COST SHARES
Total industry income is the sum of the gross operating surplus (GOS) of corporations and government, gross mixed income (GMI) and compensation of employees (COE). Gross mixed income includes both capital and labour components, and these are split in order to obtain capital and labour income shares. These income shares are used to weight capital and labour inputs when measuring value added based MFP. The capital income share is given by the sum of GOS and proprietor's capital income (capital's share of GMI) divided by total income. Labour's income share is then the residual, but more precisely it is the sum of COE and proprietor's labour income (labour's share of GMI) divided by total income.
For measuring gross output based MFP it is more relevant to use total industry cost. That is in order to measure a combined inputs index of capital, labour and intermediate inputs a cost share is required for intermediate inputs, capital and labour. The intermediate inputs cost share is based on the current price value of the intermediate inputs. Capital and labour income as derived above form their respective cost shares.
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