Market Power and Labor Share

A. Bauer and Jocelyn Boussard
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A. Bauer: Insee - Crest

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: Secular trends in market power and labor share have important implications for inequality and allocative efficiency. Studying them requires comprehensive and detailed firm-level data spanning several decades. For that purpose, we leverage a novel and detailed database on the universe of French firms between 1984 and 2016, that we use to document a rise in concentration in France since the beginning of the 1990s. Despite a relative stability of the aggregate labor share, we show that firms with lower labor shares have been gaining market shares. As low labor share firms also tend to be larger, this market share reallocation has been stronger in industries where concentration increased the most. We rely on markups as proxies of firm-level market power, and on a flexible production function that allows the identification of firm-specific output elasticities and markups. We find that the markup of the typical firm has decreased, but the reallocation of market shares toward larger firms contributed to an increase of the aggregate markup. Finally, we show how taking into account reallocation across firms is essential to understand how the aggregate market power evolution has shaped the dynamics of the aggregate labor share in France.

Keywords: Labor share; markup; competition; production function (search for similar items in EconPapers)
JEL-codes: E10 E23 E25 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-bec, nep-com and nep-mac
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Citations: View citations in EconPapers (5)

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https://www.bnsp.insee.fr/ark:/12148/bc6p06zrk77/f1.pdf Document de travail de la DESE numéro G2020/13 (application/pdf)

Related works:
Journal Article: Market Power and Labor Share (2020)
Working Paper: Market Power and Labor Share (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:nse:doctra:g2020-13

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