Abstract
Using idiosyncratic stock returns, I estimate heterogeneous firm-level labor supply elasticities by labor productivity, worker skill, and time. After accounting for the mitigating impact of adjustment costs, I use these elasticity estimates to quantify how wage markdowns affect the following: a wide cross-sectional labor share spread by productivity; the public firm aggregate labor share decline from 1991-2014; and productive firms’ high profits and valuations, despite low investment. Overall, profits from wage markdowns are worth 20-25% (4%) of aggregate capital income (revenues). Productive firms’ market power over skilled workers plays a central role in these patterns.
Bryan Seegmiller
Assistant Professor of Finance
I’m an assistant professor in the finance department at the Kellogg School of Management at Northwestern University. I received my PhD from the MIT Sloan School of Management in May 2022.