The Fall of the Labor Share and the Rise of Superstar Firms
Time：4:00pm - 5:30pm, May 31, 2019
Venue：Room 359S, Overseas Exchange Center, Peking University
(Professor of International Trade and Labor Markets, University of Zurich)
The fall of labor's share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments of trends in labor’s share typically have relied on industry or macro data, obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of “superstar firms.” If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm value-added and sales. As the importance of superstar firms increases, the aggregate labor share will tend to fall. Our hypothesis offers several testable predictions: industry sales will increasingly concentrate in a small number of firms; industries where concentration rises most will have the largest declines in the labor share; the fall in the labor share will be driven largely by between-firm reallocation rather than (primarily) a fall in the unweighted mean labor share within firms; the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; and finally, such patterns will be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.
David Dorn is Professor of International Trade and Labor Markets at the University of Zurich and Affiliated Professor at the UBS International Center Economics in Society. He was previously a tenured Associate Professor at the Center for Monetary and Financial Studies (CEMFI) in Madrid, a Visiting Professor at Harvard University, and a Visiting Scholar at Boston University, MIT, and the University of Chicago. His research connects the fields of labor economics, international trade, economic geography, and macroeconomics. In particular, he studies how globalization and technology affect labor markets. Professor Dorn is a Research Fellow of the Centre for Economic Policy Research (CEPR) in London, the Institute for the Study of Labor (LZA) in Bonn, and the Center for Economic Studies/ifo Institute (CESifo) in Munich. He is a member of the Editorial Board of the Review of Economic Studies, and an Associate Editor of the Journal of the European Economic Association. He is also the recipient of an ERC-level Starting Grant from the Swiss National Science Foundation.