Macroeconomics: The joint dynamics of firms, labor shares, and capital-labor substitution
Published: 3 February 2022
24 February. Dr Joachim Hubmer, University of Pennsylvania
Dr Joachim Hubmer, University of Pennsylvania
'Not a Typical Firm: The Joint Dynamics of Firms, Labor Shares, and Capital-Labor Substitution' (co-authored by P. Restrepo)
Thursday 24 February, 3pm - 4.30pm
Zoom online seminar
Abstract
While the US labor share has declined, especially in manufacturing and retail, the labor share of a typical firm has increased. This paper introduces a model where firms incur fixed costs to automate tasks. In response to lower capital prices, the model reproduces the labor share dynamics observed in the data: large firms automate more tasks, reducing the aggregate labor share; while the median firm continues to operate a labor-intensive technology with a rising labor share. Using our model, we decompose the labor share decline and the rise in concentration into a part driven by lower capital prices and a part driven by sales reallocation to more productive higher-markup firms. Reallocation played a minor role in explaining the labor share decline in manufacturing but an important role in retail and other sectors during 1982-2012. These conclusions are in line with estimates of markups and capital elasticities from Compustat.
Biography
Joachim Hubmer is an Assistant Professor of Economics at the University of Pennsylvania. Previously, he received a PhD in Economics at Yale University. His research centers on the macroeconomics of technological change and inequality. Recent research includes studies on technology adoption across firms and its impact on market and labor share dynamics, as well as on the determinants of wealth inequality over the life-cycle.
Further information: business-events@glasgow.ac.uk
First published: 3 February 2022
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