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

Different factors determine whether the returns of new technology go to capital, or labour as wages. The fall of labor’s share of GDP in the United States and many other countries in recent decades is well documented but it is unclear why.  Existing empirical assessments typically rely on industry or macro data, obscuring heterogeneity among firms. In this paper, the authors analyse 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.”

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Chosen by

Sir Chris Pissarides

Theme

Workers in Transition

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