Labor Share and Firm Performance

Yuki Hashimoto

Public Policy Review, 2017, vol. 13, issue 2, 183-206

Abstract: This study analyzes the relationship between firms f distribution of value added, particularly labor share, and their yearly performance, using panel data (for 1994 - 2013) from the Financial Statements Statistics of Corporations by Industry in Japan. In all samples, while a decline in labor share accompanies sales growth in the same year, rises in the share are observed two years later, indicating the possibility of average firms having adjusted profit changes with the intertemporal distribution. An analysis in which firms are broken down by industry and average sales growth found that sales changes at manufacturing firms have significantly negative effects on labor share in the same year, irrespective of the extent of sales growth rates. This might be because fixed costs f share of total labor costs are higher at manufacturing firms; even if value added increases in line with sales growth, total labor costs are adjusted only slightly, resulting in a decline in labor share. At rapidly growing non-manufacturing firms, however, sales growth does not accompany labor share fs decline. This means that the distribution of profits to workers increases as much as value added growth at these firms. Apparently, these firms distribute value added to labor costs, dividend and retained earnings in line with value added growth, keeping profit shares for these items stable.

Keywords: labor share; value added; rent sharing (search for similar items in EconPapers)
JEL-codes: D22 G31 J30 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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