New Firms, Capital Intensity and the Labor Share: New Theoretical and Empirical Insights

Arbeitspapier

This paper considers a two sectors heterogeneous firms model where firms' specific production technology and capital intensity are endogenously determined through business dynamics. It shows that a shock to the relative price of investment goods is followed by the entrance of new firms characterized by higher capital intensity of production and lower labor income share. Using ORBIS firm-level data of the US economy, the paper finds strong and robust evidence confirming that new firms enter the market with higher capital intensity. Furthermore, firms-level data are used to show that the labor share is significantly affected by capital intensity, as well as by firms' size and firms' mark-up.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8255

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Investment; Capital; Intangible Capital; Capacity ; Aggregate Factor Income Distribution
• Subject: firms dynamics ; firms heterogeneity ; labor income share ; capital intensity ; capital technological change ; ORBIS microdata

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Grazzini, Jakob ; Rossi, Lorenza
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/217006
• Last update: 10.03.2025, 11:43 AM CET