Firm heterogeneity and the aggregate labour share

Matteo Richiardi and Luis Valenzuela

No CEMPA9/23, Centre for Microsimulation and Policy Analysis Working Paper Series from Centre for Microsimulation and Policy Analysis at the Institute for Social and Economic Research

Abstract: We propose a model-based decomposition method for the aggregate labour share in terms of the first moments of the joint distribution of TFP, 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: 2023-12-13
New Economics Papers: this item is included in nep-bec and nep-tid
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Related works:
Journal Article: Firm heterogeneity and the aggregate labour share (2024)
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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