Capital Share Dynamics When Firms Insure Workers

71 Pages Posted: 20 Sep 2016

See all articles by Barney Hartman-Glaser

Barney Hartman-Glaser

University of California, Los Angeles (UCLA) - Anderson School of Management

Hanno N. Lustig

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Mindy Zhang

University of Texas at Austin

Multiple version iconThere are 2 versions of this paper

Date Written: September 2016

Abstract

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.

Suggested Citation

Hartman-Glaser, Barney and Lustig, Hanno N. and Zhang, Mindy, Capital Share Dynamics When Firms Insure Workers (September 2016). NBER Working Paper No. w22651, Available at SSRN: https://ssrn.com/abstract=2840599

Barney Hartman-Glaser (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Hanno N. Lustig

Stanford Graduate School of Business ( email )

Stanford GSB
655 Knight Way
Stanford, CA California 94305-6072
United States
3108716532 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mindy Zhang

University of Texas at Austin ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
9
Abstract Views
446
PlumX Metrics