Non-neutral technology, firm heterogeneity, and labor demand

Hongsong Zhang

Journal of Development Economics, 2019, vol. 140, issue C, 145-168

Abstract: In firm-level panel data, labor share exhibits large cross-sectional differences and a declining trend over time. This study examines the role of non-Hicks neutral technology differences across firms and over time in explaining these patterns. The non-Hicks neutral technology allows for differential factor-augmenting efficiencies for capital, labor, and material, and it has direct implications on labor shares. Estimated using firm-level production data and variation in input prices, evidence from the Chinese steel industry affirms the large heterogeneity of the non-Hicks neutral technology across firms, and its change over time is also highly non-Hicks neutral toward saving labor. The non-Hicks neutral technology explains over 50 percent of the 5.01-percentage points decline in labor share in the sample period, mainly due to the evolution of heterogeneous non-Hicks neutral technology and the resulting reallocation effect.

Keywords: Declining labor share; Labor share heterogeneity; Non-Hicks neutral technology; Firm heterogeneity; Chinese steel industry (search for similar items in EconPapers)
JEL-codes: D24 D33 E25 O33 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:140:y:2019:i:c:p:145-168

DOI: 10.1016/j.jdeveco.2019.06.001

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