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Concentrating on the Fall of the Labor Share

Author

Listed:
  • David Autor
  • David Dorn
  • Lawrence F. Katz
  • Christina Patterson
  • John Van Reenen

Abstract

In this paper, we discuss an explanation for the fall in share of labour in GDP based on the rise of "superstar firms." If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profit margins and a low share of labor in firm value-added and sales. As the importance of superstar firms increases, the aggregate labour share will fall. This hypothesis suggests that sales will increasingly concentrate in a small number of firms and that industries where concentration rises most will have the largest declines in the labour share. We find support for these predictions aggregating up micro-data from the US Census 1982-2012.

Suggested Citation

  • David Autor & David Dorn & Lawrence F. Katz & Christina Patterson & John Van Reenen, 2017. "Concentrating on the Fall of the Labor Share," CEP Discussion Papers dp1476, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1476
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    References listed on IDEAS

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    1. Lawrence Robert Z., 2015. "Recent Declines in Labor's Share in U.S. Income: A Preliminary Neoclassical Account," Working Paper Series rwp15-034, Harvard University, John F. Kennedy School of Government.
    2. Robert Z. Lawrence, 2015. "Recent Declines in Labor's Share in US Income: A Preliminary Neoclassical Account," Working Paper Series WP15-10, Peterson Institute for International Economics.
    3. Yu Zheng & Raul Santaeulalia & Dongya Koh, 2015. "Labor Share Decline and the Capitalization of Intellectual Property Products," 2015 Meeting Papers 844, Society for Economic Dynamics.
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    Citations

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    Cited by:

    1. Das, Tirthatanmoy & Polachek, Solomon, 2017. "Micro Foundations of Earnings Differences," IZA Discussion Papers 10922, Institute for the Study of Labor (IZA).
    2. repec:nbr:nberch:14012 is not listed on IDEAS
    3. Stefano Schiavo & Lionel Nesta, 2017. "International Competition and Rent Sharing in French Manufacturing," DEM Working Papers 2017/07, Department of Economics and Management.
    4. Georges Vivien Houngbonon & Pascal Da Costa, 2017. "Declining Labor Share and Innovation," Working Papers hal-01653816, HAL.
    5. repec:wfo:wstudy:61256 is not listed on IDEAS
    6. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," IZA Discussion Papers 11475, Institute for the Study of Labor (IZA).
    7. Florian Botte & Laurent Cordonnier & Thomas Dallery & Vincent Duwicquet & Jordan Melmies & Franck Van de Velde, 2017. "The cost of capital: between losses and diversion of wealth
      [Le coût du capital : entre pertes et détournement de richesses]
      ," Working Papers hal-01711157, HAL.
    8. Terry Gregory & A.M. Salomons & Ulrich Zierahn, 2018. "Racing With or Against the Machine? : Evidence from Europe," Working Papers 18-07, Utrecht School of Economics.
    9. Clemens Struck & Adnan Velic, 2017. "Automation, New Technology, and Non-Homothetic Preferences," Trinity Economics Papers tep1217, Trinity College Dublin, Department of Economics.
    10. D�ttling, Robin & Perotti, Enrico C, 2017. "Secular Trends and Technological Progress," CEPR Discussion Papers 12519, C.E.P.R. Discussion Papers.
    11. Giuseppe Berlingieri & Patrick Blanchenay & Chiara Criscuolo, 2017. "The Great Divergence(s)," CEP Discussion Papers dp1488, Centre for Economic Performance, LSE.
    12. Autor, David & Dorn, David & Katz, Lawrence F. & Patterson, Christina & Van Reenen, John, 2017. "The fall of the Labor share and the rise of superstar firms," LSE Research Online Documents on Economics 83616, London School of Economics and Political Science, LSE Library.
    13. Caballero, Ricardo & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2017. "Rents, Technical Change, and Risk Premia: Accounting for Secular Trends in Interest Rates, Returns to Capital, Earnings Yields, and Factor Shares," CEPR Discussion Papers 11833, C.E.P.R. Discussion Papers.
    14. Budzinski, Oliver & Stöhr, Annika, 2018. "Die Ministererlaubnis als Element der deutschen Wettbewerbsordnung: Eine theoretische und empirische Analyse," Ilmenau Economics Discussion Papers 114, Ilmenau University of Technology, Institute of Economics.
    15. Maier, Michael F. & Viete, Steffen & Ody, Margard, 2017. "Plattformbasierte Erwerbsarbeit: Stand der empirischen Forschung," IZA Research Reports 81, Institute for the Study of Labor (IZA).
    16. Tommaso Ciarli & Alberto Marzucchi & Edgar Salgado & Maria Savona, 2018. "The Effect of R&D Growth on Employment and Self-Employment in Local Labour Markets," SPRU Working Paper Series 2018-08, SPRU - Science Policy Research Unit, University of Sussex Business School.
    17. Avi Goldfarb & Daniel Trefler, 2018. "AI and International Trade," NBER Chapters,in: The Economics of Artificial Intelligence: An Agenda National Bureau of Economic Research, Inc.
    18. Terry Gregory & Anna Salomons & Ulrich Zierahn, 2018. "Racing With or Against the Machine? Evidence from Europe," CESifo Working Paper Series 7247, CESifo Group Munich.
    19. repec:aea:aecrev:v:107:y:2017:i:5:p:614-20 is not listed on IDEAS
    20. repec:fip:fedfel:00145 is not listed on IDEAS
    21. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2017. "Rents, Technical Change, and Risk Premia Accounting for Secular Trends in Interest Rates, Returns on Capital, Earning Yields, and Factor Shares," American Economic Review, American Economic Association, vol. 107(5), pages 614-620, May.
    22. Daniel Berkowitz, 2018. "Market Distortions and Labor Share Distributions: Evidence from Chinese Manufacturing Firms," Working Paper 6466, Department of Economics, University of Pittsburgh.
    23. Guschanski, Alexander & Onaran, Özlem, 2017. "The political economy of income distribution: industry level evidence from 14 OECD countries," Greenwich Papers in Political Economy 17518, University of Greenwich, Greenwich Political Economy Research Centre.
    24. repec:cje:issued:v:50:y:2017:i:5:p:1414-1444 is not listed on IDEAS
    25. Keith Head & Barbara J. Spencer, 2017. "Oligopoly in international trade: Rise, fall and resurgence," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1414-1444, December.

    More about this item

    Keywords

    labour share; concentration; superstar firms;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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