Micro-level evidence on the determinants of the firm’s labor share: Evidence from Spain

A micro-level analysis is a natural approach to study the distribution of labor income. In this paper, we consider a cross-firm analysis to study the determinants of the labor share using data from Spanish industries. We show that the ratio of employment share to sales share at the firm level is a key variable positively related to the firm's labor share. Furthermore, industry concentration is negatively associated with the firm's labor share, as more productive industries with higher market concentration tend to have firms with lower labor share. Finally, we show that the top 1% firms in terms of sales have much lower impact on the cross-variation of the firms’ labor share than firms with lower sales.