Capital Share Dynamics When Firms Insure Workers
Although the aggregate capital share of U.S. firms has increased, the firm-level capital share of a typical U.S. firm has decreased. This divergence is due to mega-firms that now produce a larger output share without a proportionate increase in labor compensation. We develop a model in which firms insure workers against firm-specific shocks, where more productive firms allocate more rents to shareholders, while less productive firms endogenously exit. Increasing firm-level risk delays exit and increases the measure of mega-firms, which raises the aggregate capital share while lowering the average firm's capital share. An increase in the level of rents quantitatively magnifies this effect. We present evidence supporting this mechanism.
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Copy CitationBarney Hartman-Glaser, Hanno Lustig, and Mindy Z. Xiaolan, "Capital Share Dynamics When Firms Insure Workers," NBER Working Paper 22651 (2016), https://doi.org/10.3386/w22651.
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Published Versions
BARNEY HARTMAN‐GLASER & HANNO LUSTIG & MINDY Z. XIAOLAN, 2019. "Capital Share Dynamics When Firms Insure Workers," The Journal of Finance, vol 74(4), pages 1707-1751. citation courtesy of 
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