The mightier, the stingier: Firms’ market power, capital intensity, and the labor share of income

Adrjan, Pawel (2018): The mightier, the stingier: Firms’ market power, capital intensity, and the labor share of income.

Abstract

What determines the proportion of a firm’s income that workers receive as compensation? This paper uses longitudinal firm data from a period of substantial labor share variation to understand the firm-level determinants of the labor share of income—a question that has so far only been addressed with country- and sector-level data. Firms with greater market power and a higher ratio of capital to labor allocate a smaller proportion of their value added to workers. These results suggest that firm-level drivers play a key role in the evolution of the aggregate labor share, which have declined significantly since the 1970s.

• Item Type: MPRA Paper
• Language: English
• Keywords: Labor Share, Employee Compensation, Factor Income Distribution, Market Power, Capital Intensity
• Subjects: D - Microeconomics > D3 - Distribution > D33 - Factor Income Distribution; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General

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