EconPapers    
Economics at your fingertips  
 

Firm Heterogeneity and the Aggregate Labour Share

Matteo Richiardi and Luis Valenzuela

No 166, LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies

Abstract: Using a static model of firm behaviour with imperfect competition on the product and labour markets, we quantify the effect of firm heterogeneity in total factor productivity, market power, capital, wages and prices on the aggregate labour share. In particular, we suggest a new decomposition of the aggregate labour share in terms of the first moments of the joint distribution of these variables across firms, providing a bridge between the micro and the macro approach to functional distribution. We provide an application of our method to the UK manufacturing sector, using firm-level data for the period 1998-2014. The analysis confirms that heterogeneity matters: in an economy populated only by representative firms, the labour share would be 10 percentage points lower. Among all the dimensions studied, heterogeneity in total factor productivity and labour market power are the most relevant ones, whereas heterogeneity in product market power matters the least, with wages and prices in between. However, the observed fall in the aggregate labour share over the period is mostly explained by a widening of the disconnect between average productivity and real wages, with a smaller role for an increase in the average product and labour market power of firms after the Great Recession, while changes in the dispersion of these variables mostly offset each other.

Keywords: labour share; firm heterogeneity; market power; firm level data (search for similar items in EconPapers)
JEL-codes: D33 E25 L10 D20 D42 D43 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.laboratoriorevelli.it/_pdf/wp166.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: Firm Heterogeneity and the Aggregate Labour Share (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cca:wplabo:166

Access Statistics for this paper

More papers in LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies Contact information at EDIRC.
Bibliographic data for series maintained by Giovanni Bert ().

 
Page updated 2021-06-12
Handle: RePEc:cca:wplabo:166