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Employer Market Power in Silicon Valley

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  • Gibson, Matthew

    (Williams College)

Abstract

Adam Smith alleged that employers sometimes secretly collude to reduce labor earnings. This paper examines an important case of such behavior: illegal no-poaching agreements through which information-technology companies agreed not to compete for each other's workers. Exploiting the plausibly exogenous timing of a US Department of Justice investigation, I estimate the effects of these agreements using a difference-in-differences design. Data from Glassdoor permit the inclusion of rich employer- and job-level controls. On average, the no-poaching agreements reduced salaries at colluding firms by 4.8 percent. Stock bonuses and ratings of job satisfaction were also negatively affected. These estimates are consistent with considerable employer market power.

Suggested Citation

  • Gibson, Matthew, 2021. "Employer Market Power in Silicon Valley," IZA Discussion Papers 14843, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp14843
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    Cited by:

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    2. Paolo Martellini & Todd Schoellman & Jason A. Sockin, 2022. "The Global Distribution of College Graduate Quality," Working Papers 791, Federal Reserve Bank of Minneapolis.

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    More about this item

    Keywords

    oligopsony; employer market power; labor earnings; monopsony;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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