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Author(s)

Bryan Seegmiller

Public firms with high labor productivity have a large and expanding labor market competitive advantage. Using firm-specific stock returns to estimate heterogeneous labor supply elasticities by labor productivity and across time, calibrated to a dynamic wage posting model featuring costly hiring, I estimate wage markdowns which largely explain: a wide cross-sectional labor share spread by productivity; the public firm aggregate labor share decline from 1991-2014; and productive firms’ high valuations given their modest investment rates. Cashflows from wage markdowns are worth two-fifths of aggregate capital income. Market power over skilled workers may play an important role in these patterns.
Date Published: 2023
Citations: Seegmiller, Bryan. 2023. Valuing Labor Market Power: The Role of Productivity Advantages.