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Market Power and Labor Share

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  • Arthur Bauer
  • Jocelyn Boussard

Abstract

[eng] Secular trends in market power and labor share have important implications for inequality and allocative efficiency. Studying them requires comprehensive, detailed firm-level data spanning several decades. Using a novel database on the universe of French firms between 1984 and 2016, we document a rise in concentration since the early 1990s. Despite a stability of the aggregate labor share, larger firms with lower labor shares gained market shares, especially in industries where concentration increased the most. The markup of the typical firm, considered here as a proxy of its market power, has decreased, but market shares reallocation toward larger firms contributed to an increase in the aggregate markup. In particular, we do not find that the rise in concentration is accompanied by an increase in market power at the top. Finally, we show that taking into account reallocation across firms is essential to understand how the trends in market power have shaped the dynamics of the aggregate labor share in France.

Suggested Citation

  • Arthur Bauer & Jocelyn Boussard, 2020. "Market Power and Labor Share," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 520-521, pages 125-146.
    • Handle: RePEc:nse:ecosta:ecostat_2020_520d_8
    DOI: https://doi.org/10.24187/ecostat.2020.520d.2034
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    Cited by:

    1. Panon, Ludovic, 2022. "Labor share, foreign demand and superstar exporters," Journal of International Economics, Elsevier, vol. 139(C).
    2. Matteo G. Richiardi & Luis Valenzuela, 2024. "Firm heterogeneity and the aggregate labour share," LABOUR, CEIS, vol. 38(1), pages 66-101, March.
    3. Alessandro Bellocchi & Giovanni Marin & Giuseppe Travaglini, 2021. "The Great Fall of Labor Share:Micro Determinants for EU Countries Over 2011-2019," Working Papers 2102, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2021.
    4. repec:hal:spmain:info:hdl:2441/5j3i17uo7399t940lrt6h6n545 is not listed on IDEAS
    5. Hubert Drazkowski & Sebastian Zalas, 2023. "The evolution of labor share in Poland. New evidence from firm-level data," GRAPE Working Papers 82, GRAPE Group for Research in Applied Economics.
    6. Mathias Lé & Frédéric Vinas, 2020. "The Financing of Investment: Firm Size, Asset Tangibility and the Size of Investment," Working papers 777, Banque de France.
    7. Anatolijs Prohorovs & Julija Bistrova, 2022. "Labour Share Convergence in the European Union," Economies, MDPI, vol. 10(9), pages 1-21, August.
    8. repec:hal:wpspec:info:hdl:2441/5j3i17uo7399t940lrt6h6n545 is not listed on IDEAS

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    More about this item

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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