Labor Share Decline and Productivity Slowdown: A Micro-Macro Analysis

Francesca Crucitti and Lorenza Rossi

No 350577481, Working Papers from Lancaster University Management School, Economics Department

Abstract: This paper uses firm-level data to empirically investigate the relative contribution of the declining relative price of investments, the increasing automation, and the rising price markups on the labor share decline and productivity slowdown witnessed in the last 20 years in the Spain manufacturing sector. The results point to automation and markups as important drivers of both phenomena, while the relative price of investments has the opposite sign, coherent with the evidence of capital-labor complementarity. A theoretical model characterized by rm heterogeneity, endogenous markups distribution, and financial market frictions, parsimoniously accounts for the empirical findings, and it is used to draw aggregate implications. Last, the model accounts for the observed changes in the distribution of rm markup and size and for the decline in business dynamism that occurred in the last decades.

Keywords: Labor share; TFP Losses; Firm dynamics; Capital Misallocation (search for similar items in EconPapers)
JEL-codes: E22 E25 O16 O33 O40 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-bec, nep-eec, nep-eff and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:lan:wpaper:350577481

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