Arbeitspapier
Micro-mechanisms behind declining labour shares: Market power, production processes, and global competition
This article investigates how changing production processes and increasing market power at the firm level relate to a fall in Germany's manufacturing sector labour share. Coinciding with the fall of the labour share, I document a rise in firms' product and labour market power. Notably, labour market power is a more relevant source of firms' market power than product market power. Increasing product and labour market power, however, only account for 30% of the fall in the labour share. The remaining 70% are explained by a transition of firms towards less labour-intensive production activities. I study the role of final product trade in causing those secular movements. I find that rising foreign export demand contributes to a decline in the labour share by increasing labour market power within firms and by inducing a reallocation of economic activity from nonexporting-high-labour-share to exporting-low-labour-share firms.
- Language
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Englisch
- Bibliographic citation
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Series: IWH-CompNet Discussion Papers ; No. 3/2019
- Classification
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Wirtschaft
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Aggregate Factor Income Distribution
Trade and Labor Market Interactions
Labor-Management Relations, Trade Unions, and Collective Bargaining: General
Market Structure, Firm Strategy, and Market Performance: General
Industry Studies: Manufacturing: General
- Subject
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labour share
market power
labour market distortions
international trade
factor substitution
- Event
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Geistige Schöpfung
- (who)
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Mertens, Matthias
- Event
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Veröffentlichung
- (who)
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Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
- (where)
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Halle (Saale)
- (when)
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2019
- Handle
- URN
-
urn:nbn:de:gbv:3:2-104802
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Mertens, Matthias
- Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
Time of origin
- 2019
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The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration
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Declining labour share: Evidence of a change in the underlying production technology
The micro-level dynamics of declining labour share: Lessons from the Finnish great leap
Capital Composition and the Declining Labor Share
Globalisation, concentration and footloose firms: in search of the main cause of the declining labour share
Tax competition, globalization and declining social protection
Technological chance and growth regimes: Assessing the case for universal basic income in an era declining labour shares
Technological change and growth regimes: Assessing the case for universal basic income in an era declining labour shares
A microeconomic analysis of the declining labor share in Japan
What drives the declining wealth effect of subsequent share repurchase announcements?