Superstars, shooting stars, and the labour share

Recent analyses linked the decline of the US labour share over past decades to reallocation favouring highly productive “superstar” firms with low labour shares, and “shooting stars”, firms experiencing transient labour share drops and productivity surges. This work provides novel cross-country evidence on the productivity-labour share nexus over recent decades. Productivity and labour shares are inversely related, both at the firm and industry levels. Reallocation to firms with persistently low labour shares significantly reduces aggregate labour shares across countries, whereas shooting stars play only a limited role. Persistent low labour share firms are a specific type of productivity superstar characterised by low wages and high capital intensity. Their rise is related to productivity divergence within industries and rising export volumes. These findings raise concerns about the extent to which the workforce benefits from aggregate productivity growth, and suggests the importance of policies that can strengthen the productivity-wage link.