Digitalization, Industry Concentration, and Labor Dynamics: Evidence from CEE Countries
Year: 2025 Volume: 75 Issue: 2 Pages: 170-196
Abstract: This paper examines the relationship between industry concentration, digitalization, and labor outcomes in Central and Eastern European countries using aggregated firm-level data from CompNet and EU-KLEMS for the period 2005 to 2020. Our analysis reveals a strong correlation between higher industry concentration and improved labor productivity and wages, while simultaneously observing a decline in the labor share, consistent with the superstar firm hypothesis. However, the diverse labor market dynamics in the CEE region underscore the complexity of these relationships. Furthermore, we examine the significant role of digitalization in positively accelerating labor productivity, especially in more concentrated industries. Our results suggest that increased digital investment does not mitigate but rather accelerates the negative impact of increasing concentration on labor share, suggesting a potentially dominant labor-saving effect of these technologies.
JEL classification: J23; J24; J30
Keywords: industry concentrations, digitalization, productivity, wages, labor share
DOI: https://doi.org/10.32065/CJEF.2025.02.03
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