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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

    as
    1. Robert Z. Lawrence, 2015. "Recent Declines in Labor's Share in US Income: A Preliminary Neoclassical Account," NBER Working Papers 21296, National Bureau of Economic Research, Inc.
    2. 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.
    3. Matthew Rognlie, 2015. "Deciphering the Fall and Rise in the Net Capital Share," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 1-69.
    4. Matthew Rognlie, 2015. "Deciphering the Fall and Rise in the Net Capital Share: Accumulation or Scarcity?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 1-69.
    5. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    labour share; concentration; superstar firms;
    All these keywords.

    JEL classification:

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

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    This paper has been announced in the following NEP Reports:

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