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Testing the Superstar Firm Hypothesis

Alexander Schiersch () and Caroline Stiel

No 1849, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The superstar firms model provides a compelling explanation for two simultaneously occurring phenomena: the rise of concentration in industries and the fall of labor shares. Our empirical analysis confirms two of the underlying assumptions of the model: the market share increases and the labor share decreases with increasing firm-level total factor productivity, providing support for the superstar firms’ hypothesis. However, we find no evidence for the underlying mechanism of the model, the distribution of fixed labor costs. Instead, we observe increasing returns to scale that also explain lower labor shares of larger firms.

Keywords: superstar firms; total factor productivity; labor share; market share; firm size (search for similar items in EconPapers)
JEL-codes: D24 E20 L11 (search for similar items in EconPapers)
Pages: 21 p.
Date: 2020
New Economics Papers: this item is included in nep-bec, nep-eff and nep-mac
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