Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, June 29, 2020

Market Power and Labor Share

  1. By: Arthur Bauer (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Jocelyn Boussard (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, Directorate General for Economic and Financial Affairs (DG ECFIN) - European Commission)
    Abstract: This paper leverages a novel and comprehensive database on French firms from 1966 to 2016 to document important facts about secular trends in market power and labor shares, especially the role of market power in explaining variations of the aggregate labor share, as opposed to other technological factors. To do so, we follow the literature and rely on measures of industry concentration and firm level markups as proxies of market power. We find first that concentration has increased since the beginning of the 1980s in France, that the distribution of labor shares shifted upwards and that those two facts are correlated at the industry level. Second, aggregate markups increased slightly, but firm level markups decreased markedly. We find that the rise of concentration is correlated with a downward shift of the markup distribution, suggesting that the two measures might imperfectly capture different dimensions of market power. Third, larger firms have higher markups and lower labor shares. To sum up, larger firms with lower labor shares and higher markups gained market shares, even more so in industries where firm level labor shares increased and markups decreased most. From a macro point of view, the relative stability of the aggregate labor share in France can be decomposed into a small negative contribution of the aggregate markup, and a small positive contribution of aggregate technology, but from a micro point of view, reallocation contributed negatively, firm level markups contributed positively, and the contribution of technology was negligible.
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02353137&r=com

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