The Labor Demand Implications of Brand Capital: Evidence from Trademark Transactions

Brand capital-an intangible asset that differentiates a firm's products-has grown in recent decades, alongside the rise of intangible investments and the decline in the labor share. Trademarks are legal claims on brand capital and are actively traded across firms, providing a setting to study how reallocating brand capital reshapes firm behavior and aggregate outcomes. Leveraging a novel link of Italian administrative data on trademark ownership, firms' financial statements, and employer-employee records, we exploit firm-to-firm trademark transactions to identify the effects of brand-capital investments. Guided by a model in which firms combine production labor, expansionary labor, and brand capital, we use an event-study design to estimate firm-level effects and quantify their aggregate implications. Acquiring a trademark increases intangible assets by 19%, sales by 8%, and employment by 6%, while leaving weekly earnings unchanged and reducing the firm-level labor share. Employment gains are concentrated among marketing and sales workers, indicating that brand capital is not skill-neutral. Accounting for both buyers and sellers, trademark transactions reallocate brand capital toward larger firms, raising sales and lowering the labor share. Calibrating the model to our estimates, we find that this reallocation generates a one percentage-point decline in the aggregate labor share in the long run.