required. First, taxes on production and imports (minus subsidies) are removed from the gross value added at basic prices. The calculations are based on information from the UN System of National Accounts using the main methodologies proposed in the literature on the labor share of income (Bernanke & Gürkaynak, 2001; Diwan, 2001; Harrison, 2002; Jayadev, 2007).

**We adjust the labor share following the methodology proposed by Guerriero (2012).** Based on the six alternative adjustments to the labor share proposed in the Guerriero (2012) study, this paper focuses in particular on the definitions coded by the author as LS4 and LS5:

- LS4 = [compensation of employees]/[value added (– indirect taxes – depreciation of fixed capital) – mixed income]. This ratio assumes that the share of labor income is the same in the corporate and non-corporate sectors. Typically, the non-corporate sector is expected to be more labor-intensive than the corporate sector, so that this adjustment will tend to understate the labor share adjustment. Note that in Appendix E of the Guerriero study, the labor share for Mexico under LS4 is 0.48, while under definition LS5 it is 0.60 (Guerriero 2012, 32–6).

- LS5 = [compensation of employees * total workforce/number of employees]/[value added (– indirect taxes – depreciation of fixed capital)]. This ratio assumes that the wage rates in the unincorporated sector are the same as in the corporate sector, when typically they are expected to be lower in the unincorporated sector. Therefore, this ratio will tend to marginally overstate the labor share adjustment.

**The actual adjustment is expected to be between LS4 and LS5.** Hence, we use an average of the two methods to adjust for the labor share in the unincorporated sector and the self-employed sector for the estimations of labor income in Mexico. Relying on various national statistics sources for Mexico (ILO, UN, SHCP) on labor markets and mixed income, an average estimation of ratios LS4 and LS5 of the labor share of value added was selected from the different proposed and possible ratios. The fact that they reflect a middle range of values allows us to re-estimate the income accruing to capital (on the basis of this methodology and data).

**The standard definition of capital income implies measuring it net of capital consumption.** Therefore, where data are available, consumption of fixed capital has been subtracted from the measure of value added, obtaining a net income measure.

**After the adjustments described above, the income accruing to capital is divided by the stock of private capital, including the value of inventory stocks and land.** The values for capital stocks are calculated using the perpetual inventory method (results that are calculated by dividing investment flows by the sum of depreciation and growth of capital stocks in percentage terms). The resulting series is then compared to GDP and the ratios (K/Y) compared to other Mexico-specific and broader international studies to assess its acceptability. This provides the first set of empirical results under different assumptions for labor’s share and income accruing to capital and the corresponding returns to private capital in Mexico.

**Because PEMEX affects the estimation of the rates of return in the Mexican economy, the EOCK calculation is likewise affected.** Further analysis on the rates of return to capital in

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