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Wage Setting in Multiproduct Firms

Author

Listed:
  • Jackie M.L. Chan
  • Michael Irlacher
  • Michael Koch
  • Luca Macedoni

Abstract

This paper reveals a new determinant of wage markdowns at the firm level, namely, the product scope. Using matched employer-employee data on Danish manufacturing firms, we document a negative elasticity between wages and firm scope, which is of a similar magnitude but opposite sign as the firm-size wage premium. We rationalize the wage discount using a theory where workers value the opportunity to switch product lines as an amenity. Multiproduct firms exercise their monopsony power to offer lower wages. Our findings have important implications for understanding labor market dynamics in times of rising concentration from the contribution of large multiproduct firms.

Suggested Citation

  • Jackie M.L. Chan & Michael Irlacher & Michael Koch & Luca Macedoni, 2025. "Wage Setting in Multiproduct Firms," Economics working papers 2025-02, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2025-02
    Note: English
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    More about this item

    Keywords

    Multiproduct firms; Monopsony power; Wages; Amenities; Labor share;
    All these keywords.

    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
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F10 - International Economics - - Trade - - - General

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