Dividing the Pie

Abstract

The authors are the first to study the factors determining labor’s share of income on the level of the individual firm, employing an unusually informative panel data set. The empirical examination is concerned with Switzerland, which stands out as one of the very few developed countries with a stable labor share. Broadly confirming results from previous cross-country and industry-level studies, the authors find that the main factor decreasing the labor share between 2001 and 2010 was the increase in the firm’s share of workers using information and communication technology. The main reasons why Switzerland’s labor share remained almost constant are the counteracting effects of a relatively slow rate of technological progress in 1980 to 1995 and sectoral reallocation toward industries with above-average labor shares.

Industry Concentration in Europe and North America

“…Product market competition has been shown to be positively correlated with productivity (Disney et al, 2003;Aghion et al, 2009), particularly for firms far from or close to the frontier (Andrews et al, 2016). Industry mark-ups, again a proxy of the degree of competition, can also affect innovation (Aghion et al, 2005), industry concentration is correlated with income distribution (Siegenthaler and Stucki, 2015;Autor et al, 2017a,b) and foreign competitors may impact economic volatility (Cravino and Levchenko, 2017).…”