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Concentrating on the Fall of the Labor Share


  • Autor, David

    () (MIT)

  • Dorn, David

    () (University of Zurich)

  • Katz, Lawrence

    () (Harvard University)

  • Patterson, Christina

    () (Massachusetts Institute of Technology)

  • Van Reenen, John

    () (MIT Sloan School of Management)


The recent fall of labor's share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a "superstar firm" model where industries are increasingly characterized by "winner take most" competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor's share.

Suggested Citation

  • Autor, David & Dorn, David & Katz, Lawrence & Patterson, Christina & Van Reenen, John, 2017. "Concentrating on the Fall of the Labor Share," IZA Discussion Papers 10539, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10539

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    References listed on IDEAS

    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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    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. Georges Vivien Houngbonon & Pascal Da-Costa, 2017. "Declining Labor Share and Innovation," Working Papers hal-01653816, HAL.
    4. Clemens Struck & Adnan Velic, 2017. "Automation, New Technology, and Non-Homothetic Preferences," Trinity Economics Papers tep1217, Trinity College Dublin, Department of Economics.
    5. 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.
    6. 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.
    7. repec:aea:aecrev:v:107:y:2017:i:5:p:614-20 is not listed on IDEAS
    8. repec:fip:fedfel:00145 is not listed on IDEAS
    9. 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.
    10. 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.
    11. Keith Head & Barbara J. Spencer, 2017. "Oligopoly in International Trade: Rise, Fall and Resurgence," NBER Working Papers 23720, National Bureau of Economic Research, Inc.

    More about this item


    labor share; sales concentration;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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