[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/113642.html
   My bibliography  Save this paper

Winners take all (the most): The effects of market concentration on labor share and wage inequality

Author

Listed:
  • Sossdorf, Fernando
Abstract
The increase in market concentration in the major advanced economies in recent decades has led to an exhaustive analysis of its implications. One of them is that it may explain the fall in labor share. This is explained, according to one theoretical strand, by the emergence of highly efficient superstars firms with low levels of labor share that, due to reallocation effects as they gain very large market share, depress aggregate labor share. In turn, wage inequality between workers with different skills may also increase because superstars firm may demand highly skilled workers. Thus, this paper investigate the effects of market concentration on the labor share and on the highly skilled worker share in the wage bill in the Chilean manufacturing. The results indicate that an increase in concentration is associated with a fall in labor share and a increase in the share of the wage bill that is paid to highly skilled workers. Moreover, those industries with the largest increase in concentration are those with the largest drop in labor share and the largest increase in the highly skilled worker share in the wage bill. However, the small group of large companies that dominate the industries are far from being superstars: they have not become more productive and more innovative and their contribution to aggregate productivity and employment has not increased over time. On the contrary, they charge a higher markup than the rest of firms. The findings shows that increases in market concentration may be detrimental to the economy as dominant firms polarize the labor market, do not contribute to increases in productivity and innovation and exert market power.

Suggested Citation

  • Sossdorf, Fernando, 2022. "Winners take all (the most): The effects of market concentration on labor share and wage inequality," MPRA Paper 113642, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:113642
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/113642/1/MPRA_paper_113642.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Autor & Anna Salomons, 2018. "Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share," NBER Working Papers 24871, National Bureau of Economic Research, Inc.
    2. Jae Song & David J Price & Fatih Guvenen & Nicholas Bloom & Till von Wachter, 2019. "Firming Up Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(1), pages 1-50.
    3. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 61-103.
    4. Daron Acemoglu & Pascual Restrepo, 2018. "Artificial Intelligence, Automation, and Work," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 197-236, National Bureau of Economic Research, Inc.
    5. Tommaso Ciarli & Alberto Marzucchi & Edgar Salgado & Maria Savona, 2018. "The Effect of R&D Growth on Employment and Self-Employment in Local Labour Markets," SPRU Working Paper Series 2018-08, SPRU - Science Policy Research Unit, University of Sussex Business School.
    6. Giovanni DOSI & Maria Enrica VIRGILLITO, 2019. "Whither the evolution of the contemporary social fabric? New technologies and old socio‐economic trends," International Labour Review, International Labour Organization, vol. 158(4), pages 593-625, December.
    7. Irene Brambilla & Daniel Lederman & Guido Porto, 2019. "Exporting firms and the demand for skilled tasks," Canadian Journal of Economics, Canadian Economics Association, vol. 52(2), pages 763-783, May.
    8. Pol Antràs & Teresa C. Fort & Felix Tintelnot, 2017. "The Margins of Global Sourcing: Theory and Evidence from US Firms," American Economic Review, American Economic Association, vol. 107(9), pages 2514-2564, September.
    9. Amann, Edmund & Baer, Werner, 2008. "Neo-liberalism and market concentration in Brazil: The emergence of a contradiction?," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 252-262, May.
    10. Jan De Loecker & Frederic Warzynski, 2012. "Markups and Firm-Level Export Status," American Economic Review, American Economic Association, vol. 102(6), pages 2437-2471, October.
    11. Doan, Ha Thi Thanh & Wan, Guanghua, 2017. "Globalization and the Labor Share in National Income," ADBI Working Papers 639, Asian Development Bank Institute.
    12. Daron Acemoglu & Pascual Restrepo, 2018. "Artificial Intelligence, Automation and Work," Boston University - Department of Economics - Working Papers Series dp-298, Boston University - Department of Economics.
    13. Akerman, Anders, 2018. "The Relative Skill Demand of Superstar Firms and Aggregate Implications," Research Papers in Economics 2018:2, Stockholm University, Department of Economics.
    14. Jan De Loecker & Jan Eeckhout & Gabriel Unger, 2020. "The Rise of Market Power and the Macroeconomic Implications [“Econometric Tools for Analyzing Market Outcomes”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 561-644.
    15. repec:oup:qjecon:v:129:y:2013:i:1:p:61-103 is not listed on IDEAS
    16. Ronald U. Mendoza & Lai-Lynn Angelica Barcenas & Padmini Mahurkar, 2013. "Balancing Industrial Concentration and Competition for Economic Development in Asia: Insights from South Korea, China, India, Indonesia and the Philippines," Journal of Reviews on Global Economics, Lifescience Global, vol. 2, pages 248-277.
    17. Maurizio Naldi & Marta Flamini, 2014. "The CR4 index and the interval estimation of the Herfindahl-Hirschman Index: an empirical comparison," Working Papers hal-01008144, HAL.
    18. Juan A. Correa & Miguel Lorca & Francisco Parro, 2019. "Capital–Skill Complementarity: Does Capital Composition Matter?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(1), pages 89-116, January.
    19. Mai Dao & Ms. Mitali Das & Zsoka Koczan & Weicheng Lian, 2017. "Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence," IMF Working Papers 2017/169, International Monetary Fund.
    20. Ms. Faezeh Raei & Anna Ignatenko & Borislava Mircheva, 2019. "Global Value Chains: What are the Benefits and Why Do Countries Participate?," IMF Working Papers 2019/018, International Monetary Fund.
    21. Cavalleri, Maria Chiara & Eliet, Alice & McAdam, Peter & Petroulakis, Filippos & Soares, Ana & Vansteenkiste, Isabel, 2019. "Concentration, market power and dynamism in the euro area," Working Paper Series 2253, European Central Bank.
    22. repec:bin:bpeajo:v:49:y:2019:i:2018-01:p:1-87 is not listed on IDEAS
    23. Solimano,Andrés, 2012. "Chile and the Neoliberal Trap," Cambridge Books, Cambridge University Press, number 9781107003545, January.
    24. Julian Messina & Joana Silva, 2018. "Wage Inequality in Latin America," World Bank Publications - Books, The World Bank Group, number 28682.
    25. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matteo G. Richiardi & Luis Valenzuela, 2024. "Firm heterogeneity and the aggregate labour share," LABOUR, CEIS, vol. 38(1), pages 66-101, March.
    2. Loukas Karabarbounis & Brent Neiman, 2019. "Accounting for Factorless Income," NBER Macroeconomics Annual, University of Chicago Press, vol. 33(1), pages 167-228.
    3. Ugur, Mehmet, 2024. "Innovation, market power and the labour share: Evidence from OECD industries," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    4. Elena Crivellaro & Aikaterini Karadimitropoulou, 2019. "The role of financial constraints on labour share developments: macro- and micro-level evidence," Working Papers 257, Bank of Greece.
    5. Alessandro Bellocchi & Giovanni Marin & Giuseppe Travaglini, 2021. "The Great Fall of Labor Share:Micro Determinants for EU Countries Over 2011-2019," Working Papers 2102, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2021.
    6. Jacob, Tinu Iype & Paul, Sunil, 2024. "Labour income share, market power and automation: Evidence from an emerging economy," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 37-45.
    7. Emilien Gouin-Bonenfant, 2018. "Productivity Dispersion, Between-firm Competition and the Labor Share," 2018 Meeting Papers 1171, Society for Economic Dynamics.
    8. Coveri, Andrea & Pianta, Mario, 2022. "Drivers of inequality: wages vs. profits in European industries," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 230-242.
    9. Guimarães, Luís & Mazeda Gil, Pedro, 2022. "Explaining the Labor Share: Automation Vs Labor Market Institutions," Labour Economics, Elsevier, vol. 75(C).
    10. Wang, Linhui & Cao, Zhanglu & Dong, Zhiqing, 2023. "Are artificial intelligence dividends evenly distributed between profits and wages? Evidence from the private enterprise survey data in China," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 342-356.
    11. Ronald R. Kumar & Peter J. Stauvermann, 2020. "Economic and Social Sustainability: The Influence of Oligopolies on Inequality and Growth," Sustainability, MDPI, vol. 12(22), pages 1-23, November.
    12. Ryosuke Shimizu & Shohei Momoda, 2020. "Does Automation Technology increase Wage?," KIER Working Papers 1039, Kyoto University, Institute of Economic Research.
    13. Maarten de Ridder, 2019. "Market Power and Innovation in the Intangible Economy," Discussion Papers 1907, Centre for Macroeconomics (CFM).
    14. Anderton, Robert & Jarvis, Valerie & Labhard, Vincent & Morgan, Julian & Petroulakis, Filippos & Vivian, Lara, 2020. "Virtually everywhere? Digitalisation and the euro area and EU economies," Occasional Paper Series 244, European Central Bank.
    15. Geoff Weir, 2018. "Wage Growth Puzzles and Technology," RBA Research Discussion Papers rdp2018-10, Reserve Bank of Australia.
    16. Mertens, Matthias, 2022. "Micro-mechanisms behind declining labor shares: Rising market power and changing modes of production," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    17. Shimizu, Ryosuke & Momoda, Shohei, 2023. "Does automation technology increase wage?," Journal of Macroeconomics, Elsevier, vol. 77(C).
    18. Aquilante, Tommaso & Chowla, Shiv & Dacic, Nikola & Haldane, Andrew & Masolo, Riccardo & Schneider, Patrick & Seneca, Martin & Tatomir, Srdan, 2019. "Market power and monetary policy," Bank of England working papers 798, Bank of England.
    19. Geiger, Niels & Prettner, Klaus & Schwarzer, Johannes A., 2018. "Automatisierung, Wachstum und Ungleichheit," Hohenheim Discussion Papers in Business, Economics and Social Sciences 13-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    20. Dreger, Christian & Fourné, Marius & Holtemöller, Oliver, 2023. "Globalization, Productivity Growth, and Labor Compensation," IZA Discussion Papers 16010, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Market Concentration; labor share; highly skilled worker; superstar firms.;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:113642. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.