Declining Labor and Capital Shares

By Simcha Barkai. Journal of Finance, 2020

688 citations recorded by the source corpus.

This paper presents direct measures of capital costs, equal to the product of the required rate of return on capital and the value of the capital stock. The capital share, equal to the ratio of capital costs and gross value added, does not offset the decline in the labor share. Instead, a large increase in the share of pure profits offsets declines in the shares of both labor and capital. Industry data show that increases in concentration are associated with declines in the labor share.

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Citations in the corpus

Productivity and Misallocation in General Equilibrium* (2017, unknown): “(2008), Buera et al. (2011), Epifani and Gancia (2011), Fernald and Neiman (2011), Buera and Moll (2012), D’Erasmo and Moscoso Boedo (2012), Bartelsman et al.”
The Fall of the Labor Share and the Rise of Superstar Firms* (2017, unknown): “Our article is also closely related to Barkai (2017), who independently documented a negative industry-level relationship between changes in labor share and changes in concentration for the United States.”
Diverging Trends in National and Local Concentration (2018, unknown): “(2006) and Barnatchez et al. (2017) argue that the NETS data set might at times be slow in reporting the entry and exit of small firms. Given their findings, one might question the extent to which our results are driven by the exit of small firms not being reported accurately.However, the fact that ”
How European Markets Became Free: A Study of Institutional Drift (2018, unknown): “” Barkai (2017) also finds an increase in excess profits and De-Loecker and Eeckhout (2017) and Hall (2018) argue that markups of prices over marginal costs have increased in the US Gutiérrez and Philippon (2017a) link the decline in competition to the decrease in corporate investment.”
Is Aggregate Market Power Increasing? Production Trends Using Financial Statements (2018, unknown): “For example, Barkai (2016) argues that only an increase in markups can generate a simultaneous decline in the shares of both labor and capital.”
The Elusive Explanation for the Declining Labor Share (2021, methodology): “Barkai (2020) and Autor et al. (2020) nd a positive correlation across industries between the rise in concentration and the decline in the labor share.”
Declining Competition and Investment in the U.S. (2017, unknown): “User Cost-implied mark-ups: Second, Barkai (2017) estimates the user cost of capital from expected returns on bond or equity for the U.S. Non Financial Corporate Sector. Caballero et al. (2017) implement a similar approach but without specifying a cost of capital. Gutiérrez (2017) imputes mark-ups a”
From Good to Bad Concentration? US Industries over the Past 30 Years (2019, background): “He finds an increase in the profit share from 11% to 21% from 1988-2015, which closely aligns with Barkai (2017) over the same period.”