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Making their own weather? Estimating employer labour-market power and its wage effects

Author

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  • Pedro S. Martins

Abstract

The subdued wage growth observed over the last years in many countries has spurred renewed interest in monopsony views of the labour market. This paper is the first to measure the extent and robustness of employer labour-market power and its wage implications exploiting comprehensive matched employer-employee data. We find average (employment-weighted) Herfindhal indices of 800 to 1,100; and that less than 9% of workers are exposed to concentration levels thought to raise market power concerns. However, these figures can increase significantly with different methodological choices. Finally, when holding worker composition constant and instrumenting concentration, wages are found to be negatively affected by employer concentration, with elasticities of between -1.5% and -3%.

Suggested Citation

  • Pedro S. Martins, 2018. "Making their own weather? Estimating employer labour-market power and its wage effects," Working Papers 95, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  • Handle: RePEc:cgs:wpaper:95
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    File URL: http://webspace.qmul.ac.uk/pmartins/CGRWP95.pdf
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    References listed on IDEAS

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    1. David Autor & David Dorn & Lawrence F. Katz & Christina Patterson & John Van Reenen, 2017. "The Fall of the Labor Share and the Rise of Superstar Firms," CEP Discussion Papers dp1482, Centre for Economic Performance, LSE.
    2. José A. Azar & Ioana Marinescu & Marshall I. Steinbaum & Bledi Taska, 2018. "Concentration in US Labor Markets: Evidence From Online Vacancy Data," NBER Working Papers 24395, National Bureau of Economic Research, Inc.
    3. Serguey Braguinsky & Lee G. Branstetter & Andre Regateiro, 2011. "The Incredible Shrinking Portuguese Firm," NBER Working Papers 17265, National Bureau of Economic Research, Inc.
    4. Sónia Cabral & Pedro S. Martins & João Pereira dos Santos & Mariana Tavares, 2018. "Collateral Damage? Labour Market Effects of Competing with China - at Home and Abroad," Working Papers w201812, Banco de Portugal, Economics and Research Department.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Wenjing Duan & Pedro S. Martins, 2018. "Rent sharing in China: Magnitude, heterogeneity and drivers," Working Papers 96, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.

    More about this item

    Keywords

    Oligopsony; Wages; Portugal;

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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