Capital Share Dynamics When Firms Insure Workers / Barney Hartman-Glaser, Hanno Lustig, Mindy Z. Xiaolan.

Format:

Book

Author/Creator:

Hartman-Glaser, Barney.

Contributor:

National Bureau of Economic Research.

Lustig, Hanno.

Xiaolan, Mindy Z.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22651.

NBER working paper series no. w22651

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

Although the aggregate capital share of U.S. firms has increased, the firm-level capital share of a typical U.S. firm has decreased. This divergence is due to mega-firms that now produce a larger output share without a proportionate increase in labor compensation. We develop a model in which firms insure workers against firm-specific shocks, where more productive firms allocate more rents to shareholders, while less productive firms endogenously exit. Increasing firm-level risk delays exit and increases the measure of mega-firms, which raises the aggregate capital share while lowering the average firm's capital share. An increase in the level of rents quantitatively magnifies this effect. We present evidence supporting this mechanism.

Notes:

Print version record

September 2016.