IDEAS home Printed from https://ideas.repec.org/p/tky/fseres/2022cf1208.html
   My bibliography  Save this paper

The Decline of Labor Share and New Technology Diffusion: Implications forMarkups andMonopsony Power

Author

Listed:
  • Shoki Kusaka

    (Department of Economics, Yale University)

  • Tetsuji Okazaki

    (Faculty of Economics, The University of Tokyo)

  • Ken Onishi

    (Hitotsubashi Institute for Advanced Study)

  • Naoki Wakamori

    (Graduate School of Economics, Hitotsubashi University)

Abstract

We study the mechanism behind the decline in labor share using highly detailed plant-level data on the cement industry in Japan. Using information on the production technology in place at each plant, we find that most of the labor share decline can be explained by new technology diffusion (introduction of the “new suspension preheater kiln†). The labor share stays constant, or even slightly increases, over time within plants with the same technology, whereas the aggregate labor share declines as production shifts to plants with a new and more capital-intensive technology. We also find that the information on plant-level technology is key to rejecting other potential hypotheses and that we would reach a qualitatively different conclusion without this information. To show this, we examine, with and without technology information, two alternative hypotheses; (i) the decline in labor share is associated with an increase in markups, and (ii) firms exercise monopsony power in the labor market. We reject these two hypotheses with technology information but may not without it.

Suggested Citation

  • Shoki Kusaka & Tetsuji Okazaki & Ken Onishi & Naoki Wakamori, 2022. "The Decline of Labor Share and New Technology Diffusion: Implications forMarkups andMonopsony Power," CIRJE F-Series CIRJE-F-1208, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2022cf1208
    as

    Download full text from publisher

    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2022/2022cf1208.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ezra Oberfield & Gene M. Grossman, 2022. "The Elusive Explanation for the Declining Labor Share," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 93-124, August.
    2. repec:hal:spmain:info:hdl:2441/170cd4sul89ddpnfuomvfm0jc0 is not listed on IDEAS
    3. Allan Collard-Wexler & Jan De Loecker, 2015. "Reallocation and Technology: Evidence from the US Steel Industry," American Economic Review, American Economic Association, vol. 105(1), pages 131-171, January.
    4. Zhang, Hongsong, 2019. "Non-neutral technology, firm heterogeneity, and labor demand," Journal of Development Economics, Elsevier, vol. 140(C), pages 145-168.
    5. Alberto Salvo, 2010. "Inferring market power under the threat of entry: the case of the Brazilian cement industry," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 326-350, June.
    6. Andrew Glover & Jacob Short, 2020. "Can Capital Deepening Explain the Global Decline in Labor's Share?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 35-53, January.
    7. Daron Acemoglu & Pascual Restrepo, 2020. "Robots and Jobs: Evidence from US Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2188-2244.
    8. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    9. Philippe Aghion & Céline Antonin & Simon Bunel & Xavier Jaravel, 2020. "What Are the Labor and Product Market Effects of Automation? New Evidence from France," SciencePo Working papers Main hal-03403062, HAL.
    10. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    11. Simcha Barkai, 2020. "Declining Labor and Capital Shares," Journal of Finance, American Finance Association, vol. 75(5), pages 2421-2463, October.
    12. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    13. Sun, Chang, 2020. "Multinational production with non-neutral technologies," Journal of International Economics, Elsevier, vol. 123(C).
    14. Chad Syverson, 2019. "Macroeconomics and Market Power: Context, Implications, and Open Questions," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 23-43, Summer.
    15. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    16. Nathan H. Miller & Matthew Osborne, 2014. "Spatial differentiation and price discrimination in the cement industry: evidence from a structural model," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 221-247, June.
    17. repec:hal:spmain:info:hdl:2441/3n1gbsj6rs80ipqv9d42nfd0ge is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fabrizio Leone, 2023. "Multinationals, robots and the labor share," CEP Discussion Papers dp1900, Centre for Economic Performance, LSE.
    2. Thomas Hasenzagl & Luis Perez, 2023. "The Micro-Aggregated Profit Share," Papers 2309.12945, arXiv.org, revised Nov 2023.
    3. Maarten De Ridder & Basile Grassi & Giovanni Morzenti, 2021. "The Hitchhiker’s Guide to Markup Estimation," Working Papers 677, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    4. Díez, Federico J. & Fan, Jiayue & Villegas-Sánchez, Carolina, 2021. "Global declining competition?," Journal of International Economics, Elsevier, vol. 132(C).
    5. Laia Maynou & Alistair McGuire & Victoria Serra‐Sastre, 2024. "Efficiency and productivity gains of robotic surgery: The case of the English National Health Service," Health Economics, John Wiley & Sons, Ltd., vol. 33(8), pages 1831-1856, August.
    6. Ensar Yılmaz & Zeynep Kaplan, 2022. "Heterogeneity of market power: firm-level evidence," Economic Change and Restructuring, Springer, vol. 55(2), pages 1207-1228, May.
    7. Jordi Jaumandreu & Rigoberto Lopez, 2024. "Markups in US food manufacturing accounting for non‐neutral productivity," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(2), pages 573-591, June.
    8. David Van Dijcke, 2022. "On the Non-Identification of Revenue Production Functions," Papers 2212.04620, arXiv.org, revised May 2024.
    9. Czarnitzki, Dirk & Fernández, Gastón P. & Rammer, Christian, 2023. "Artificial intelligence and firm-level productivity," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 188-205.
    10. Mauro Caselli & Arpita Chatterjee & Shengyu Li, 2023. "Productivity and Quality of Multi-product Firms," Discussion Papers 2023-10, School of Economics, The University of New South Wales.
    11. Jacob, Tinu Iype & Paul, Sunil, 2024. "Labour income share, market power and automation: Evidence from an emerging economy," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 37-45.
    12. Gibbon, Alexandra J. & Schain, Jan Philip, 2023. "Rising markups, common ownership, and technological capacities," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    13. van Heuvelen, Gerrit Hugo & Bettendorf, Leon & Meijerink, Gerdien, 2021. "Markups in a dual labour market: The case of the Netherlands," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    14. Caselli, Mauro & Schiavo, Stefano & Nesta, Lionel, 2018. "Markups and markdowns," Economics Letters, Elsevier, vol. 173(C), pages 104-107.
    15. Michał Gradzewicz & Jakub Mućk, 2020. "Unravelling the Markups Changes: The Role of Demand Elasticity and Concentration," KAE Working Papers 2020-056, Warsaw School of Economics, Collegium of Economic Analysis.
    16. Leone, Fabrizio, 2021. "Foreign Ownership and Robot Adoption," CEPREMAP Working Papers (Docweb) 2111, CEPREMAP.
    17. Mondolo, Jasmine, 2021. "Macroeconomic dynamics and the role of market power. The case of Italy," MPRA Paper 110172, University Library of Munich, Germany, revised 05 Oct 2021.
    18. Abebe, Girum & McMillan, Margaret & Serafinelli, Michel, 2022. "Foreign direct investment and knowledge diffusion in poor locations," Journal of Development Economics, Elsevier, vol. 158(C).
    19. Haarburger, Richard & Stemmler, Henry, 2023. "Taking over the World? Automation and Market Power," EconStor Preprints 281378, ZBW - Leibniz Information Centre for Economics.
    20. Alexander S. Kritikos & Alexander Schiersch & Caroline Stiel, 2022. "The productivity shock in business services," Small Business Economics, Springer, vol. 59(3), pages 1273-1299, October.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2022cf1208. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CIRJE administrative office (email available below). General contact details of provider: https://edirc.repec.org/data/ritokjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.