of domestic savings we reach an estimated value of 10 percent. To reduce the impact of yearly fluctuations in the data, it would be preferable to use an average for the 2003–2011 period, which comes to 11.8 percent for the series without domestic savings and 10.5 percent when taking displaced domestic consumption—and thus domestic savings—into consideration. We use these initial results, which confirm the EOCK results obtained in the Rodriguez (2009) study, as a starting point for a more detailed analysis in the next section, including reasonable assumptions about the impact of domestic savings.

# **_3.1.3 Methodology and data sources_**

**In this section we employ the traditional weighted cost of capital approach, but with some differences in the calculation of net income to capital and in the considerations on the applicable capital stocks.** The starting point is the national accounts data from a top-down perspective. From GDP, we deduct indirect taxes and depreciation to arrive at net domestic product at basic (or factor) prices. This, in turn, is divided between income to labor and income to capital (net operating surplus).

**The data sources employed in the estimation of the EOCK are critically important.** In this analysis we rely on several key sources. For the national accounts data, we use figures from the SHCP, the national statistics institute or _Instituto Nacional de Estadística y Geografía_ (INEGI), the Central Bank or _Banco de México,_ the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), and the World Bank. For data on labor employment, compensation, and mixed income, we rely on figures from the SHCP, United Nations (UN) Statistics, the International Labor Organization (ILO), and INEGI. For capital market information, we use data from the SHCP, the Banco de México, the UN, and the IMF. Finally, for information on taxes and different sectors, we use OECD and SHCP data. In the case of Mexico, in addition to consistent sets of data on the national accounts, a selected set of statistics on labor, wages, mixed income, as well as the different forms of taxation and the corresponding sector of origin are critical to further strengthen the estimation of the EOCK.

**In this analysis, the initial data is adjusted for the estimates of labor income contained in the capital income accounts.** According to several authors such as Caselli and Feyrer (2007), Karabarbounis and Neiman (2012), and Guerriero (2012), the labor share in national domestic product has to be adjusted for the labor share of mixed income (self-employed, non-paid family labor, unincorporated businesses) reported as capital income. This adjustment increases the labor income share and thus reduces the income accruing to capital. In addition, we deduct from the income accruing to capital the portion that can be considered income accruing to land. We then further adjust the income to capital by adding the proportion of indirect taxes that can be attributed to capital income.

**The data reported in the national accounts requires an adjustment to ensure proper representation of the share of net national income accruing to labor.** In the computation of the labor share, which is a ratio to national income, the labor income component needs to be derived and added to the compensation of employees as reported in the national income accounts. For the computation of its denominator—the income aggregate—a few adjustments are

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