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Department of Economics

The Firms behind the Labor Share: Evidence from Danish Micro data


We establish a sizable shift in the individual labor shares of Danish rms since 1999. Whereas the mean and median labor shares have increased by around 5 points, the labor share of the largest rms is much lower today, in particular the labor share of manual workers. A substantial part of this is driven by the top 1 per cent of rms that have grown substantially bigger. The main driver of this is an increase in markups, though large rms have become more capital intensive during the period. We show that investments in capital and R&D predict declines in the labor share. Though o shoring activities have impacted the labor share it is not a strong quantitative driver of the results. We show that these changes tie strongly to the rms' export behavior: Large rms with lower labor share scale up value of exports, though not number of destinations nor product category. The increase in value comes predominantly from increases in quantity.