Seminar

Productivity Dispersion, Between-Firm Competition, and the Labor Share

Emilien GOUIN-BONENFANT (University of California, San Diego)

February 11, 2019, 14:00–15:30

Toulouse

Room MS001

Job Market Seminar

Abstract

I propose a tractable model of the labor share that emphasizes the interaction between labor market imperfections and productivity dispersion. I bring the model to the data using an administrative dataset covering the universe of firms in Canada. As in the data, most firms have a high labor share, yet the aggregate labor share is low due to the disproportionate effect of a small fraction of large, extremely productive “superstar firms”. I find that a rise in the dispersion of firm productivity leads to a decline of the aggregate labor share in favor of firm profit. The mechanism is that productivity dispersion effectively shields highproductivity firms from wage competition. Reduced-form evidence from cross-country and cross-industry data supports both the prediction and the mechanism. Through the lens of the model, rising productivity dispersion has caused the U.S. labor share to decline starting around 1990.

See also