Why Do Larger Firms Have Lower Labor Shares?
Abstract/Contents
- Abstract
- We use population panel data on firms and workers in Norway to estimate how a firm's output, use of input factors, and payment to labor change in response to exogenous changes in revenues due to shifts in its product demand or productivity. These estimates allow us to draw causal inferences about how firms change the way they produce as they grow and why larger firms have lower labor shares. We develop and estimate a model to quantify the relative importance of three sources for variation in labor shares across firms: i) the shape of the labor supply curve facing the firm, ii) differences in the returns to scale between labor and other inputs, and iii) heterogeneity across firms in the output elasticities of input factors. We employ instrument variable strategies to isolate plausibly exogenous sources of variation in the revenues of firms. We compare these instrumental variable estimates to OLS estimates and document the biases that arise when using cross-sectional data to draw conclusions about how firms grow and why larger firms have lower labor shares.
Description
| Type of resource | text |
|---|---|
| Date created | September 1, 2021 |
Creators/Contributors
| Author | Lamadon, Thibaut |
|---|---|
| Author | Light, Jack |
| Author | Mogstad, Magne |
| Organizer of meeting | Hurst, Erik |
| Organizer of meeting | Kehoe, Patrick |
| Organizer of meeting | Pastorino, Elena |
Subjects
| Subject | economics |
|---|---|
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
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- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Lamadon, T., Light, J., and Mogstad, M. (2022). Why Do Larger Firms Have Lower Labor Shares?. Stanford Digital Repository. Available at https://purl.stanford.edu/gh829wy8249
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SITE Conference 2021
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