Dividing the Pie: The Determinants of Labor's Share of Income on the Firm Level

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may February 2014Abstract This paper is 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, we find that the main factor decreasing the labor share in the estimation period is the increase in the share of workers using ICT in the firm. The main reasons why Switzerland's labor share remained almost constant are its relatively slow-rate of technological progress and shifts towards industries with above-average labor shares. JEL-Classification: D33, E25, J24, O30

Firm strategies and distributional dynamics: labour share in Italian medium-large firms

“…Therefore, despite a micro-level study does not necessarily imply results valid also for the aggregate labour share, it allows to tackle firm heterogeneity and to focus on within-firm strategies impacting on how rents are shared between capital and labour. As discussed by Siegenthaler and Stucki (2014), most of labour income determinants are related to firm's decisions and the functional distribution of income is ultimately decided at the workplace level (Dünhaupt 2013).…”

“…Only few studies have focused on firm-level data (Growiec 2012;Autor et al 2020; Adrjan 2018; Guschanski and Onaran 2018). The advantage of using firm-level data lies in the possibility to take into account composition biases (Siegenthaler and Stucki 2014). Indeed, an important fraction of the decline in the aggregate labour share can be attributed to changes in the sectoral composition of the economy (Solow 1958;De Serres et al 2001;Arpaia et al 2009;Young 2010;Elsby et al 2013).…”

“…Second, aggregate studies generally do not explicitly consider how much of the fall of the labour share is due to changes in the composition of firms, rather than by within-firm changes. Furthermore, unlike country-level studies, firm-level works based on a panel structure allow controlling for different types of endogeneity and unobserved time-invariant heterogeneity of firms (Siegenthaler and Stucki 2014).…”

“…The lack of firm-level studies is partly due to the availability of adequate data including information on labour cost, value-added, as well as financial variables and other potential drivers for wage determinants. Moreover, as acknowledged by Siegenthaler and Stucki (2014), even the analysis of the determinants of the labour share performed at the micro level would require an adequate time span since factors shaping labour changes occur in the medium-long term and should be distinguished by short-term business cycle effects. From this point of view, one advantage of country and industry level studies derives from the possibility of considering longtime span variations in factor remunerations over decades focusing on structural factors reshaping employment, occupations, wages, and profits.…”

Dividing the Pie

“… 10 In an extension presented in a previous working-paper version of this article (see Siegenthaler and Stucki 2014), we also tested whether firms with a higher share of female employees had a systematically lower labor share. This would be expected if female employees are paid below their marginal products, and the resulting rent would not benefit the male coworkers but, instead, recipients of capital income.…”