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Labour Market Concentration, Wages and Job Security in Europe

Author

Listed:
  • Bassanini, Andrea

    (OECD)

  • Bovini, Giulia

    (Bank of Italy)

  • Caroli, Eve

    (PSL Université Paris Dauphine)

  • Ferrando, Jorge Casanova

    (Compass Lexecon)

  • Cingano, Federico

    (Bank of Italy)

  • Falco, Paolo

    (University of Copenhagen)

  • Felgueroso, Florentino

    (FEDEA, Madrid)

  • Jansen, Marcel

    (Universidad Autónoma de Madrid)

  • Martins, Pedro S.

    (Universidade Nova de Lisboa)

  • Melo, António

    (University of Turin)

  • Oberfichtner, Michael

    (Institute for Employment Research (IAB), Nuremberg)

  • Popp, Martin

    (Institute for Employment Research (IAB), Nuremberg)

Abstract

We investigate the impact of labour market concentration on two dimensions of job quality, namely wages and job security. We leverage rich administrative linked employer-employee data from Denmark, France, Germany, Italy, Portugal and Spain in the 2010s to provide the first comparable cross-country evidence in the literature. Controlling for productivity and local product market concentration, we show that the elasticities of wages with respect to labour market concentration are strikingly similar across countries: increasing labour market concentration by 10% reduces wages by 0.19% in Germany, 0.22% in France, 0.25% in Portugal and 0.29% in Denmark. Regarding job security, we find that an increase in labour market concentration by 10% reduces the probability of being hired on a permanent contract by 0.46% in France, 0.51% in Germany and 2.34% in Portugal. While not affecting this probability in Italy and Spain, labour market concentration significantly reduces the probability of being converted to a permanent contract once hired on a temporary one. Our results suggest that considering only the effect of labour market concentration on wages underestimates its overall impact on job quality and hence the resulting welfare loss for workers.

Suggested Citation

  • Bassanini, Andrea & Bovini, Giulia & Caroli, Eve & Ferrando, Jorge Casanova & Cingano, Federico & Falco, Paolo & Felgueroso, Florentino & Jansen, Marcel & Martins, Pedro S. & Melo, António & Oberficht, 2022. "Labour Market Concentration, Wages and Job Security in Europe," IZA Discussion Papers 15231, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp15231
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    References listed on IDEAS

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    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 967-1015.
    2. repec:iab:iabfda:201801(en is not listed on IDEAS
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    Cited by:

    1. Alzate, David & Carranza, Eliana & Duran-Franch, Joana & Packard, Truman & Proffen, Celina, 2024. "How Regulations Impact the Labor Market: A Review of the Literatures on Product and Labor Market Regulations," IZA Discussion Papers 17536, IZA Network @ LISER.
    2. Dodini, Samuel & Løken, Katrine & Willén, Alexander, 2022. "The Effect of Labor Market Competition on Firms, Workers, and Communities," Discussion Paper Series in Economics 17/2022, Norwegian School of Economics, Department of Economics.
    3. Jhon James Mora & José María Arranz, 2024. "The Effect of COVID-19 on the Quality of Employment in Colombia," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 67(4), pages 1141-1157, December.
    4. Bassanini, Andrea & Batut, Cyprien & Caroli, Eve, 2023. "Labor Market Concentration and Wages: Incumbents versus New Hires," Labour Economics, Elsevier, vol. 81(C).
    5. Bustos, Emil, 2023. "The Effect of Centrally Bargained Wages on Firm Growth," Working Paper Series 1456, Research Institute of Industrial Economics.
    6. João Pereira & Raul Ramos & Pedro S. Martins, 2025. "Wage Cyclicality and Labor Market Institutions," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 64(4), pages 598-615, October.
    7. Lehner, Lukas & Parolin, Zachary & Pignatti, Clemente & Schmitt, Rafael Pintro, 2024. "Monopsony Power and Poverty: The Consequences of Walmart Supercenter Openings," IZA Discussion Papers 17323, IZA Network @ LISER.
    8. Chen, Yunsi & Hu, Dezhuang, 2023. "Why are exporters more gender-friendly? Evidence from China," Economic Modelling, Elsevier, vol. 118(C).
    9. Abi Adams & Tom Waters & Maria Balgova & Matthias Qian, 2023. "Firm concentration & job design: the case of schedule flexible work arrangements," IFS Working Papers W23/14, Institute for Fiscal Studies.
    10. Dodini, Samuel & Willén, Alexander, 2025. "The Power to Discriminate," Discussion Paper Series in Economics 10/2025, Norwegian School of Economics, Department of Economics.
    11. Snell, Andy & Thomas, Jonathan P. & Martins, Pedro, 2025. "Bias in estimating returns to tenure: The impact of monopsony power," Economics Letters, Elsevier, vol. 247(C).
    12. Salvanes, Kjell G & Dodini, Samuel & Willén, Alexander, 2021. "The Dynamics of Power in Labor Markets: Monopolistic Unions versus Monopsonistic Employers," CEPR Discussion Papers 16834, C.E.P.R. Discussion Papers.

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    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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