Valuing Labor Market Power: The Role of Productivity Advantages


Public firms with high labor productivity have a large and expanding labor market competitive advantage. Using firm-specific stock returns to estimate heterogeneous labor supply elasticities by labor productivity and across time, calibrated to a dynamic wage posting model featuring costly hiring, I estimate wage markdowns which largely explain: a wide cross-sectional labor share spread by productivity; the public firm aggregate labor share decline from 1991-2014; and productive firms’ high valuations given their modest investment rates. Cashflows from wage markdowns are worth two-fifths of aggregate capital income. Market power over skilled workers may play an important role in these patterns.

Revise and Resubmit, Journal of Finance
Bryan Seegmiller
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.