The Fall of the Labor Share and the Rise of Superstar Firms*

By David H. Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen. Quarterly Journal of Economics, 2017

2,136 citations recorded by the source corpus.

The fall of labor’s share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments typically rely on industry or macro data, obscuring heterogeneity among firms. In this article, we analyze micro panel data from the U.S. Economic Census since 1982 and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of “superstar firms.” If globalization or technological changes push sales toward the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms, which have high markups and a low labor share of value added. We empirically assess seven predictions of this hypothesis: (i) industry sales will increasingly concentrate in a small number of firms; (ii) industries where concentration rises most will have the largest declines in the labor share; (iii) the fall in the labor share will be driven largely by reallocation rather than a fall in the unweighted mean labor share across all firms; (iv) the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; (v) the industries that are becoming more concentrated will exhibit faster growth of productivity; (vi) the aggregate markup will rise more than the typical firm’s markup; and (vii) these patterns should be observed not only in U.S. firms but also internationally. We find support for all of these predictions.

View Paper: https://www.semanticscholar.org/paper/ac2fc638aec0ebd49ad945802c419ad236840fbf

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Citations in the corpus

German Robots - The Impact of Industrial Robots on Workers (2017, unknown): “The new technology therefore seems to benefit mostly the owners of capital and profit claimants, but not labor at large, thus adding to the recently documented fall of the labor share (Autor et al. 2017; Kehrig and Vincent 2017).”
Advanced Technologies Adoption and Use by U.S. Firms: Evidence from the Annual Business Survey (2020, unknown): “This is critical for understanding the “future of work,” given the increasing concentration of both employment and advanced 8 technology adoption in fewer, larger firms (e.g., Autor et al. 2020).”
Tasks, Automation, and the Rise in US Wage Inequality (2021, background): “Several recent works have pointed out that labor share declines concentrate on a subset of, often largest, firms (e.g., Autor et al. (2020), Kehrig and Vincent (2020)).”
The Rise of Market Power and the Macroeconomic Implications* (2020, unknown): “This is consistent with the findings in Autor et al. (2020) and Kehrig and Vincent (2017) that large firms drive the decline in the aggregate labor share. Our finding is a slightly nuanced version: market power as a common cause determines both the increase in firm size and the decline in the labor ”
Increasing differences between firms: market power and the macro-economy (2018, methodology): “Autor et al. (2018) find that the U.S. four-digit industries with the greatest increases in concentration have also had higher TFP growth and a faster growth in innovation (as measured by such indicators as cite-weighted patents).”
Kaldor and Piketty’s facts: The rise of monopoly power in the United States (2021, unknown): “Other papers generally focus on one or two of our five puzzles: Philippon and Gutierrez (2016) focuses on puzzle (5) and (2), Barkai (2016) on (3) and (4), Caballero, Farhi and Gourinchas (2017) on (3) and (4), Piketty and Zucman (2014) on (1), Autor et al. (2017) on the fall in the labor share, Gom”
Are US Industries Becoming More Concentrated?* (2019, unknown): “More recently, Autor et al. (2017) present a “superstar firm” model, in which new technologies and stronger network effects increase consumer sensitivity to prices and quality and promote product market competition.”
The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports (2022, unknown): “Indeed, Au-tor, Dorn, Katz et al. (2020) document that this growth in concentration is most apparent in industries with above-average growth in patent, intensity.”
The Nature of Firm Growth (2017, unknown): “Similarly, we obtain the dynamics in Bartelsman, Haltiwanger, and Scarpetta (2013) under the same restrictions, but allowing for z i,a ≠ 0 with σz > 0 .11 Our baseline process also aligns with models with richer heterogeneity in ex ante profiles and/or ex post shocks, as proposed by for example…”
Artificial intelligence, firm growth, and product innovation (2024, background): “Finally, we contribute to the active debate on the causes and consequences of rising industry concentration (e.g., Gutiérrez and Philippon, 2017; Syverson, 2019; Covarrubias et al., 2019; Autor et al., 2020).”
Are Price-Cost Markups Rising in the United States? A Discussion of the Evidence (2019, unknown): “But most of the hypotheses advanced to explain high market power—such as the rise of “superstar firms” (Autor et al. 2017) and a high industrial concentration ratio—fit the recent period but not the pre-1980 period. Similarly, while growth of intangible capital appears able to help explain high leve”