Labour income share, market power and automation: Evidence from an emerging economy.

The macroeconomic implications of movements in labour income share across several economies are of serious concern. This study examines the relationship between labour income share and its key drivers: market power, capital intensity and automation. The study uses data on Indian firms from 2013 to 2021. The relationship is analysed by employing panel fixed effects and method of moments panel quantile estimators. The results indicate that market power is significantly and negatively associated with the labour share of income. Similarly, capital intensity and automation have a positive impact on the labour income share. Estimates of quantile regression reveal that the influence of market power and automation becomes more pronounced at higher quantiles of the labour share. In general, the relationship is consistent even after accounting for firm size and ownership type. The study also indicate complementary nature of labour and capital. • Examines the significance of market power, capital intensity, and automation on labour income share using firm-level data. • Finds a significant inverse relationship between market power and labour income share. • Capital and labour are found to be complementary as capital intensity has a positive effect on labour income share. • Positive and significant coefficient for automation indicates the prevalence of productivity effect in the Indian context. • Market power and automation have a greater impact on firms with higher labour share. [ABSTRACT FROM AUTHOR]