Competition for Workers and the Labor Share

Katsuhiro Komatsu

No 1132, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper studies when labor market competition raises the aggregate labor share. Competition can reduce wage markdowns at each firm, but it also moves workers up the job ladder to more productive firms, which tend to have lower labor shares. I derive an accounting identity for the labor share that holds under any wage-setting protocol. When workers move only to more productive firms, the identity characterizes how the labor share responds to competition. I apply it to two standard protocols. With Pareto productivity, competition does not change the labor share under wage posting. In contrast, under sequential auctions, it even lowers the labor share for any bargaining power below one, because workers accept lower starting wages in return for more frequent raises. Nevertheless, labor productivity distributions in U.S. manufacturing imply that competition raises the labor share under both protocols unless bargaining power under sequential auctions is close to zero.

Keywords: Labor Share; Monopsony; Job Ladder; Productivity Distribution (search for similar items in EconPapers)
JEL-codes: E25 J42 J62 J64 (search for similar items in EconPapers)
Pages: 61pages
Date: 2026-10
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