Productivity dispersion and sectoral labour shares in Europe

The stability of the labour share income is a fundamental feature macroeconomic models, with broad implications for shape production function, inequality, and dynamics. However, empirically, this has been slowly declining in many countries several decades, though its causes are subject much debate. This paper analyses drivers developments Europe at sectoral level. We begin simple shift-share analysis which demonstrates that decline across primarily driven by changes within industries. then use aggregated microdata from CompNet to analyse sector-level shares decompose their effects into shifts sector average or reallocation resources between firms. Our main findings advance globalisation widening productivity gap “the best rest” have negative share. also find most due sectors providing support “superstar firms” hypothesis. finding had impact on relevance policy context current backlash against reinforces need ensure benefits passed workers.