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Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?

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  • Efraim Benmelech
  • Nittai K. Bergman
  • Hyunseob Kim

Abstract

We analyze the effect of local-level labor market concentration on wages. Using plant-level U.S. Census data during 1978–2016, we find that: (i) local-level employer concentration exhibits substantial cross-sectional variation; (ii) consistent with labor market monopsony power, there is a negative relation between local-level employer concentration and wages that strengthens with time; (iii) instrumenting concentration with merger activity shows that increased employer concentration decreases wages; (iv) the negative relation between employer concentration and wages increases when unionization rates are low; and (v) the link between productivity growth and wage growth is stronger when labor markets are less concentrated. Our results emphasize the role of local labor market monopsonies in influencing firm wage-setting.

Suggested Citation

  • Efraim Benmelech & Nittai K. Bergman & Hyunseob Kim, 2022. "Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 200-250.
    • Handle: RePEc:uwp:jhriss:v:57:y:2022:i:s:p:s200-s250
    Note: DOI: 10.3368/jhr.monopsony.0119-10007R1
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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