Concentrating on the Fall of the Labor Share

“Autor et al. (2017) argue that globalization and technological change lead to concentration and the rise of what they call “superstar” firms, which have high profits and a low labor share.”

“Zum einen zeigen jüngere ökonomische Analysen zunehmend deutlicher, dass insgesamt die Unternehmenskonzentration, insbesondere in den USA, stark angewachsen ist (inter alia, Grullon et al. 2019; Autor et al. 2017 a, 2017 b; OECD 2018).”

“Second, our findings about firm-level heterogeneity fit into a broader literature on between-firm inequality and stratified workplaces (e.g., Autor et al. 2017; Cobb and Lin 2017; Cobb and Stevens 2017; TomaskovicDevey et al. 2020; Wilmers 2018).”

“…articles published in mainstream international economics journals and National Bureau of Economic Research (NBER) papers have started to identify both the concentrated market power of superstar firms and labor’s declining income share (Autor et al., 2017; Dao et al., 2017; De Loecker et al., 2020).”

“However, evidence on this linkage is still unclear (Elsby et al., 2013; Autor et al., 2017; Cerdeiro and Komaromi, 2017).”

“…rates of firm entry and exit (Council of Economic Advisors, 2016), growing performance differences between firms and the rise of “superstar” firms (Autor et al., 2017), that average performance persistence – both among top and bottom performers – is also increasing and churn between firms is…”

“A number of recent papers documents an increase in market concentratio (Autor and Katz (2017); Bajgar et al. (2019); Grullon et al. (2019)), profitability (Barkai (2017); Covarrubias et al. (2019)) and price markups (De Loecker and Eeckhout (2018); De Loecker et al. (2020); Dı́ez et al. (2021);…”

“…of capital.43 Some recent studies have argued that there is a falling trend in the labor share, and thus a positive trend in the capital share (see, for example, Karabounis and Neiman, 2014), and Autor et al. (2017) point to the role of automation and digitization in accounting for this pattern.”

“Autor et al. (2017) proposed a superstar enterprise model, emphasising the importance of enterprise differences in the dynamic change of total labour share.”

“2 Whereas the previous literature has highlighted the role of technology (Autor et al., 2020), increasing barriers to entry, lax or ineffective antitrust enforcement (Gutiérrez and Philippon, 2018; Philippon, 2019) to explain the increase in concentration, we investigate the role of corporate tax avoidance. This paper…”

“Furthermore, mergers increase market power on labour markets, leading to worse conditions for employees (Autor et al. 2017; Naidu et al. 2018).”

“The intuition is that the more labor market power a firm has, the greater its ability to 31An increasing number of papers indicate that firm labor market power and concentration may have increased in the United States over the last few decades (David et al., 2017; Dorn et al., 2017).”

“These two factors, according to some narratives, may even be interrelated as rising markups have been concentrated among large international companies (see for instance Autor et al. (2017)) who benefit from global networks of factors of production and are able to offset the impact of wage shocks.”

“Researches have proved that superstar firms lead to the decline of labor income share (Autor et al. 2017).”

“There is a substantial academic debate (see Box 9) on the extent and consequences of higher concentration in advanced economies, and there is some evidence that it is related to the rise of superstar technology (producing or using) firms (Autor et al., 2017b).”

“The recent trend to industrial concentration has been documented (Kwoka 2014; Autor et al. 2017; Grullon, Larkin and Michaely 2017; Azar, Schmalz and Tecu forthcoming), but the possible connection to the industrial organization effects of regulatory arbitrage rarely has been explored.”

“Further, from the 1990s, the firms per worker evolved in line with employment concentration measures of Autor et al. (2020) for several super sectors of the economy.”

“…to Greece.3 Measuring global industrial concentration was not possible until now because the data required were not available.4 This study uses data from the Bureau van Dijk Orbis database to examine global 2 Autor et al. 2017 show more recent evidence of efficiency, innovation, and concentration.”

“For example, Autor et al. (2017) argue that new technologies are often associated to network externalities and low marginal costs, leading to superstar firms dominating the economy and paying a lower share of value added to wages.”

“…at a higher rate than the pro- 1While a few recent studies such as Elsby et al. (2013), Karabarbounis and Neiman (2014), Piketty and Zucman (2014) and Autor et al. (2017) argue that the U.S. labor share has decreased somewhat since the 1980s, other studies argue that this decline is due to…”

“2020), increase in firms’ sales concentration (Autor et al. 2017), and foreign direct investment (Decreuse and Maarek 2015).”

“Autor et al. (2017) analyze US firm-level data and find that the rise of ‘superstar firms’, i.e. the expansion of most productive firms with high markups and low labor shares contributed to the overall decline in labor share.”

“Moreover, there is evidence that the benefi ts of increasing innovation in, and pervasiveness of, IT has not been shared equally across fi rms, individuals, and regions (Autor et al. 2020; Brynjolfsson and McAfee 2014; Forman, Goldfarb, and Greenstein 2012). Given the centrality of IT to innovation and recent concerns…”

“(4)There is a recent literature that indeed finds that concentration in sales and markups have increased in the US since the 1980s (Autor et al., 2017; De Loecker and Eeckhout, 2017).”

“At the same time, the employment share of large firms has increased substantially over the last decades (Dorn, Katz, Patterson, and Van Reenen, 2017; Autor, Dorn, Katz, Patterson, and Van Reenen, 2020).”

“By automating processes, AI improves efficiency, reduces errors, and lowers operational costs [3, 4].”

“, 2020; Autor et al., 2017, 2020; Grullon et al., 2019; Kehrig and Vincent, 2018; Azar et al., 2020, 2018; Benmelech et al., 2018; Bajgar et al., 2019). So far, the rise in inequality and the rise in concentration have been studied in isolation.(1) In this paper, we show that the two phenomena are related. From a theo…”

“This important nexus is theoretically established by Autor et al. (2017a) but only empirically tested with firm-level US data in Autor et al. (2020).”

“One strand of work emphasizes neoclassical factors, including trade and technological change (Autor et al. 2017a; Autor et al. 2017b; Grossman et al. 2017).”

“…(Piketty 2013), changing returns to human capital and skill- biased technological change (Acemoglu and Restrepo 2017; Autor and Salomons 2018; Autor, Katz, and Kearney 2006; Kaplan and Rauh 2013), and oligopoly and firm market power due to market concentration (Autor et al. 2017; Bloom 2017).”

“And if corporations continue to consolidate their position they gain greater bargaining power, further driving down wages and labor conditions (Autor et al., 2017; Khan & Vaheesan, 2017; LeBaron, 2020).”

“For instance, larger Spanish firms make disproportionate use of internal flexibility mechanisms to reduce labour-related costs within the firm, such as the renegotiation of wages and working time schedules, the worker’s geographic location, or reductions in monetary and non-monetary payments over the worker’s salary (…”

“…the United States and other advanced economies, the growth in markups may be driven by a relatively small number of superstar firms that are large, productive, highly profitable, and able to extract large markups (Autor et al., 2017; De Loecker & Eeckhout, 2017; Diez et al., 2019).”

“In their recent study, Autor et al. (2017) attribute the decline in the labor share to increasing concentration within industries.”

“Moreover, production and demand economies of scale in ICT-intensive branches have been shown to result in highly concentrated markets with “winnertakes-all”-structures (Autor et al., 2017b,a). As a consequence, the bargaining power of corporations increases relative to their labor force and to public institutions, ena…”

“Autor et al. (2017) attribute the decline in the labor share to a rise in firm concentration within industries that has reallocated production to the largest firms, which also have relatively low labor shares. Relatedly, Kehrig and Vincent (2017) find that the majority of the labor share is due to shifts in firm marke…”

“Falling labor share Dorn et al. (2017) highlight a historical rise in the capital share since the 1970s.”