IDEAS home Printed from https://ideas.repec.org/p/bon/boncrc/crctr224_2023_475.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp475
    Download Restriction: no
    ---><---

    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. Simcha Barkai, 2020. "Declining Labor and Capital Shares," Journal of Finance, American Finance Association, vol. 75(5), pages 2421-2463, October.
    3. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    4. 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.
    5. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sophie Osotimehin & Latchezar Popov, 2023. "Misallocation and Intersectoral linkages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 177-198, December.
    2. Sophie Osotimehin & Latchezar Popov, 2023. "Misallocation and Intersectoral linkages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 177-198, December.
    3. Pablo D. Fajgelbaum & Edouard Schaal, 2020. "Optimal Transport Networks in Spatial Equilibrium," Econometrica, Econometric Society, vol. 88(4), pages 1411-1452, July.
    4. Emi Nakamura & Jón Steinsson, 2018. "Identification in Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 32(3), pages 59-86, Summer.
    5. Lorenz K.F. Ekerdt & Kai-Jie Wu, 2024. "The Rise of Specialized Firms," Working Papers 24-06, Center for Economic Studies, U.S. Census Bureau.
    6. Limão, Nuno & Handley, Kyle, 2013. "Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S," CEPR Discussion Papers 9615, C.E.P.R. Discussion Papers.
    7. Daniel Berkowitz, 2020. "Declining Market Competition in China," Working Paper 6897, Department of Economics, University of Pittsburgh.
    8. Robert S. Chirinko & Debdulal Mallick, 2022. "The Return on Private Capital: Rising and Diverging," IMES Discussion Paper Series 22-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
    9. Berkowitz, Daniel & Nishioka, Shuichiro, 2024. "The growth of firms, markets and rents: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 52(2), pages 383-399.
    10. Pinelopi K. Goldberg & Nina Pavcnik, 2016. "The Effects of Trade Policy," NBER Working Papers 21957, National Bureau of Economic Research, Inc.
    11. Singla, Shikhar, 2023. "Regulatory costs and market power," LawFin Working Paper Series 47, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    12. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    13. Nocco, Antonella & Ottaviano, Gianmarco I.P. & Salto, Matteo, 2019. "Geography, competition, and optimal multilateral trade policy," Journal of International Economics, Elsevier, vol. 120(C), pages 145-161.
    14. David R. Baqaee & Emmanuel Farhi & Kunal Sangani, 2024. "The Supply-Side Effects of Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 132(4), pages 1065-1112.
    15. Bonfiglioli, Alessandra & Crinò, Rosario & Gancia, Gino, 2025. "Firms and economic performance: A view from trade," European Economic Review, Elsevier, vol. 172(C).
    16. Piyush Panigrahi, 2021. "Endogenous Spatial Production Networks: Quantitative Implications for Trade & Productivity," Cowles Foundation Discussion Papers 2314, Cowles Foundation for Research in Economics, Yale University.
    17. Robert C. Feenstra & Philip Luck & Maurice Obstfeld & Katheryn N. Russ, 2018. "In Search of the Armington Elasticity," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 135-150, March.
    18. Pham, Hoang, 2023. "Trade reform, oligopsony, and labor market distortion: Theory and evidence," Journal of International Economics, Elsevier, vol. 144(C).
    19. Hsieh, Chang-Tai & Ossa, Ralph, 2016. "A global view of productivity growth in China," Journal of International Economics, Elsevier, vol. 102(C), pages 209-224.
    20. Kwon, Ohyun & Fleisher, Belton M. & McGuire, William H. & Zhao, Min Qiang, 2020. "Provincial Trade, Financial Friction and Misallocation in China," IZA Discussion Papers 13074, Institute of Labor Economics (IZA).

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bon:boncrc:crctr224_2023_475. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CRC Office (email available below). General contact details of provider: https://www.crctr224.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.