Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/193167
Authors: 
Mertens, Matthias
Year of Publication: 
2019
Series/Report no.: 
IWH-CompNet Discussion Papers 3/2019
Abstract: 
This article investigates how changing production processes and increasing market power at the firm level relate to a fall in Germany's manufacturing sector labour share. Coinciding with the fall of the labour share, I document a rise in firms' product and labour market power. Notably, labour market power is a more relevant source of firms' market power than product market power. Increasing product and labour market power, however, only account for 30% of the fall in the labour share. The remaining 70% are explained by a transition of firms towards less labour-intensive production activities. I study the role of final product trade in causing those secular movements. I find that rising foreign export demand contributes to a decline in the labour share by increasing labour market power within firms and by inducing a reallocation of economic activity from nonexporting-high-labour-share to exporting-low-labour-share firms.
Subjects: 
labour share
market power
labour market distortions
international trade
factor substitution
JEL: 
D24
E25
F16
J50
L10
L60
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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