Working Paper: NBER ID: w23108
Authors: David Autor; David Dorn; Lawrence F. Katz; Christina Patterson; John Van Reenen
Abstract: The recent fall of labor’s share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a “superstar firm” model where industries are increasingly characterized by “winner take most” competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor’s share.
Keywords: Labor Share; Market Concentration; Superstar Firms
JEL Codes: J3; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market share shifts toward dominant firms (L19) | aggregate labor share declines (E25) |
| changes in labor share (E25) | changes in sales concentration (L14) |
| rising sales concentration (D30) | falling labor shares (E25) |
| larger increases in concentration (D30) | larger decline in labor’s share (F66) |
| sales concentration increases (L14) | labor share decreases (E25) |