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| Jing Hang |
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| ''Market power, input substitution and the labor share'' |
| ( 2025, Vol. 45 No.2 ) |
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| An increase in the aggregate markup induces substitution of primary inputs for intermediate inputs, and substitution of labor for capital. Both effects lower the labor share if the inputs are complements. A reasonable calibration shows that a 4% increase in the markup lowers U.S. labor share by 7.5 percentage points, with input substitution accounting for about one third of the total impact.
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| Keywords: markup, labor share, double marginalization, input substitution |
JEL: E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
O4 - Economic Growth and Aggregate Productivity: General |
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| Manuscript Received : Feb 20 2025 | | Manuscript Accepted : Jun 30 2025 |
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