Carbon Intensity, Capital Intensity, and Firm-Level Labor Share: Evidence of Value-Added

Abstract Book of the 12th International Conference on Business, Management and Economics

Year: 2026

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Carbon Intensity, Capital Intensity, and Firm-Level Labor Share: Evidence of Value-Added

Dony Sultan Syarifudin, Liliana Inggrit Wijaya

ABSTRACT:

This study investigates the relationship between carbon intensity. capital intensity. and firm-level labor share. While prior research has focused mainly on how carbon emissions affect firm performance. employment. and market valuation. this paper shifts attention to the internal distribution of value added between labor and capital.
Using an international panel of 2.720 firm-year observations from 484 firms across nine countries (2016–2025). the analysis employs firm and year fixed effects with Driscoll–Kraay standard errors. The results show that carbon intensity is positively associated with labor share. This association is significantly stronger among capital-intensive firms. However. mechanism tests and component-path analysis reveal that higher carbon intensity is linked to declines in labor expenses. EBITDA. and value added.
These findings indicate that the observed increase in labor share does not reflect improved labor compensation. Instead. it is primarily driven by value-added compression. in which carbon intensity reduces the value-added base more sharply than labor expenses—especially in capital-intensive firms. The study highlights the importance of decomposing labor share before drawing welfare conclusions in the low-carbon transition. A higher labor share in carbon-intensive firms may signal operating pressure rather than better outcomes for workers.

Keywords: Carbon Intensity; Capital Intensity; Labor Share; Value-Added Compression; Low-Carbon Transition; Firm Fixed Effects