The Decline of Labor Share and New Technology Diffusion: Implications for markups and monopsony power

Author Name KUSAKA Shoki (Yale University) / OKAZAKI Tetsuji (Faculty Fellow, RIETI) / ONISHI Ken (Hitotsubashi University) / WAKAMORI Naoki (Hitotsubashi University)
Creation Date/NO. July 2023 23-E-047
Research Project Historical Evaluation of Industrial Policy
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We investigate the cause of the decline in labor share using highly-detailed plant level data from the cement industry. Using the information on production technology at each plant, we show that the major source of the decline is due to the diffusion of new technology; The labor share decreases for the plants adopting more advanced capital-intensive technology, whereas it remains steady for the plants keeping the same technology. The use of plant-level technology data is key to rejecting other potential hypotheses, such as increasing market power and monopsony power, and our conclusion would be qualitatively different without it.