TY  - JOUR
AU  - Kehrig, Matthias
AU  - Vincent, Nicolas
TI  - The Micro-Level Anatomy of the Labor Share Decline
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 25275
PY  - 2018
Y2  - November 2018
DO  - 10.3386/w25275
UR  - http://www.nber.org/papers/w25275
L1  - http://www.nber.org/papers/w25275.pdf
N1  - Author contact info:
Matthias Kehrig
Department of Economics
Duke University
237 Social Sciences, Box 90097
Durham, NC 27708
Tel: 919/660-1901
E-Mail: matthias.kehrig@duke.edu

Nicolas Vincent
HEC Montreal
Institute of Applied Economics
3000, chemin de la Côte-Sainte-Catherine
Montréal (Québec), H3T 2A7
Canada
E-Mail: nicolas.vincent@hec.ca
AB  - The aggregate labor share in U.S. manufacturing declined from 62 percentage points (ppt) in 1967 to 41 ppt in 2012. The labor share of the typical U.S. manufacturing establishment, in contrast, rose by over 3 ppt during the same period. Using micro-level data, we document a number of striking facts: (1) there has been a dramatic reallocation of value added to "hyper- productive" (HP) low-labor share establishments, with much more limited reallocation of inputs; (2) HP establishments have only a temporarily lower labor share that rebounds after five to eight years to the level of their peers; (3) selection into HP status has become increasingly correlated with past size; (4) labor share dynamics are driven by revenue total factor labor productivity, not wages or capital intensity; (5) employment has become less responsive to positive technology shocks over time; and (6) HP establishments enjoy a product price premium relative to their peers that causes their high (revenue) productivity. Counterfactual exercises indicate that selection along size rather than shocks or responsiveness to them is the primary driver of the labor share decline.
ER  -