Labor's Share and "Wage Parity"

This paper revisits capital-skill complementarity and inequality, as in Krusell, Ohanian, Rios-Rull and Violante (KORV, 2000). Using their methodology, we study how well the KORV model accounts for more recent data, including the large changes in the labor's share of income that were not present in KORV. We study both labor share of gross income (as in KORV), and income net of depreciation. We also use nonfarm business sector output as an alternative measure of production to real GDP. We find strong evidence for continued capital-skill complementarity in the most recent data, and we also find that the model continues to closely account for the skill premium. The model captures the average level of labor share, though it overpredicts its level by 2-4 percentage points at the end of the period.

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The Fall of the Labor Share and the Rise of Superstar Firms*

The Quarterly Journal of Economics ◽

10.1093/qje/qjaa004 ◽

2020 ◽

Vol 135 (2) ◽

pp. 645-709 ◽

Cited By ~ 61

Author(s):

David Autor ◽

David Dorn ◽

Lawrence F Katz ◽

Christina Patterson ◽

John Van Reenen

Keyword(s):

Value Added ◽

The United States ◽

Market Concentration ◽

Technological Changes ◽

Labor Share ◽

Economic Census ◽

New Interpretation ◽

Labor's Share ◽

The U.S ◽

Number Of Firms

Abstract The fall of labor’s share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments typically rely on industry or macro data, obscuring heterogeneity among firms. In this article, we analyze micro panel data from the U.S. Economic Census since 1982 and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of “superstar firms.” If globalization or technological changes push sales toward the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms, which have high markups and a low labor share of value added. We empirically assess seven predictions of this hypothesis: (i) industry sales will increasingly concentrate in a small number of firms; (ii) industries where concentration rises most will have the largest declines in the labor share; (iii) the fall in the labor share will be driven largely by reallocation rather than a fall in the unweighted mean labor share across all firms; (iv) the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; (v) the industries that are becoming more concentrated will exhibit faster growth of productivity; (vi) the aggregate markup will rise more than the typical firm’s markup; and (vii) these patterns should be observed not only in U.S. firms but also internationally. We find support for all of these predictions.

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Are Price-Cost Markups Rising in the United States? A Discussion of the Evidence

The Journal of Economic Perspectives ◽

10.1257/jep.33.3.3 ◽

2019 ◽

Vol 33 (3) ◽

pp. 3-22 ◽

Cited By ~ 11

Author(s):

Susanto Basu

Keyword(s):

United States ◽

Market Power ◽

Marginal Cost ◽

Cost Minimization ◽

National Income ◽

The United States ◽

Aggregate Data ◽

The Past ◽

Labor's Share

A number of recent papers have argued that US firms exert increasing market power, as measured by their markups of price over marginal cost. I review three of the main approaches to estimating economy-wide markups and show that all are based on the hypothesis of firm cost minimization. Yet different assumptions and methods of implementation lead to quite different conclusions regarding the levels and trends of markups. I survey the literature critically and argue that some of the startling findings of steeply rising markups are difficult to reconcile with other evidence and with aggregate data. Existing methods cannot determine whether markups have been stable or whether they have risen modestly over the past several decades. Even relatively small increases in markups are consistent with significant changes in aggregate outcomes, such as the observed decline in labor’s share of national income.

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CHAPTER Χ. LABOR’S SHARE, Continued

Value and Income ◽

10.4159/harvard.9780674429505.c10 ◽

1931 ◽

pp. 144-157

Keyword(s):

Labor's Share

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Working for Less: Income Inequality and the Diminishing Share of Labor in China’s National Wealth

Asian Social Science ◽

10.5539/ass.v13n6p81 ◽

2017 ◽

Vol 13 (6) ◽

pp. 81

Author(s):

Songtao Wang ◽

Tristan Kenderdine ◽

Zhen Qi

Keyword(s):

Income Inequality ◽

Gini Coefficient ◽

Labor Income ◽

Income Share ◽

Income Gap ◽

National Wealth ◽

Labor's Share

This paper demystifies variation in labor’s share of national labor income in China from the perspective of the income gap. We extend the gross national labor income function by introducing a Gini coefficient to support our argument that the share of gross national labor income decreases with an increasing Gini coefficient. The hypotheses are tested using provincial data from 1996 to 2010: (1) the Gini coefficient’s ‘inverted U’ shape partially contributes to the U-shaped evolution of the labor income-share; (2) China’s 15 per cent decline in the labor income share can be explained by the widening income gap during that time.

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