Firm heterogeneity and the aggregate labour share

Matteo Richiardi and Luis Valenzuela

LABOUR, 2024, vol. 38, issue 1, 66-101

Abstract: We propose a model‐based decomposition method for the aggregate labour share in terms of the first moments of the joint distribution of total factor productivity, market power, wages and prices, and apply it to UK manufacturing using firm‐level data for 1998–2014. Contrary to a narrative focussing on increasing disparities between firms, the observed decline in the aggregate labour share over the period is driven entirely by the decline in the labour share of the representative firm, mostly due to an increasing disconnect between average productivity and real wages. Changes in the dispersion of firm‐level variables have contributed to slightly contain this decline.

Date: 2024
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https://doi.org/10.1111/labr.12265

Related works:
Working Paper: Firm heterogeneity and the aggregate labour share (2023)
Working Paper: Firm Heterogeneity and the Aggregate Labour Share (2019)
Working Paper: Firm Heterogeneity and the Aggregate Labour Share (2019)
Working Paper: Firm Heterogeneity and the Aggregate Labour Share (2019)
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