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Union and Firm Labor Market Power

Author

Listed:
  • Miren Azkarate-Askasua
  • Miguel Zerecero

Abstract

Can union and firm market power counteract each other? What are the output and welfare effects of employer and union labor market power? Using data from French manufacturing firms, we leverage mass layoff shocks to competitors to identify a negative effect of employment concentration on wages. In line with the reduced form evidence and the French institutional setting, we develop and estimate a multi-sector bargaining model that incorporates employer market power. We find that in the absence of unions output decreases by 0.48 percent because they partially counteract distortions coming from oligopsony power. Furthermore, eliminating employer and union labor market power increases output by 1.6 percent and the labor share by 21 percentage points. Workers’ geographic mobility is key to realizing the output gains.

Suggested Citation

  • Miren Azkarate-Askasua & Miguel Zerecero, 2023. "Union and Firm Labor Market Power," CRC TR 224 Discussion Paper Series crctr224_2023_475, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_475
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp475
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    References listed on IDEAS

    as
    1. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    2. Kucheryavyy, Konstantin, 2012. "Continuity of a model with a nested CES utility function and Bertrand competition," Economics Letters, Elsevier, vol. 117(2), pages 473-476.
    3. Simcha Barkai, 2020. "Declining Labor and Capital Shares," Journal of Finance, American Finance Association, vol. 75(5), pages 2421-2463, October.
    4. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
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    More about this item

    Keywords

    Labor markets; Wage setting; Misallocation; Monopsony; Unions;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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