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Titel
From labor to intermediates : firm growth, input substitution, and monopsony / Matthias Mertens, Benjamin Schoefer ; editor: Halle Institute for Economic Research (IWH) - Member of the Leibniz Association
VerfasserMertens, Matthias ; Schoefer, Benjamin
KörperschaftLeibniz-Institut für Wirtschaftsforschung Halle
ErschienenHalle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, November 2024
Umfang1 Online-Ressource (III, 46, 28 Seiten, 2,03 MB) : Diagramme
Anmerkung
Literaturverzeichnis: Seite 43-46, Seite 28
SpracheEnglisch
SerieIWH-Diskussionspapiere ; 2024, no. 24 (November 2024)
URNurn:nbn:de:gbv:3:2-1105095 
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From labor to intermediates [2.03 mb]
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We document and dissect a new stylized fact about firm growth: the shift from labor to intermediate inputs. This shift occurs in input quantities cost and output shares and output elasticities. We establish this fact using German firm-level data and replicate it in administrative firm data from 11 additional countries. We also document these patterns in micro-aggregated industry data for 20 European countries (and with respect to industry cost shares for the US). We rationalize this novel regularity within a parsimonious model featuring (i) an elasticity of substitution between intermediates and labor that exceeds unity and (ii) an increasing shadow price of labor relative to intermediates due to monopsony power over labor or labor adjustment costs. The shift from labor to intermediates accounts for one half to one third of the decline in the labor share in growing firms (the remainder is due to wage markdowns and markups) and rationalizes most of the labor share decline in growing industries.