The Dynamics of Power in Labor Markets: Monopolistic Unions versus Monopsonistic Employers

Arbeitspapier

This paper brings together the modern literatures on monopsony power and labor unions by empirically examining the effects of unionization on the dynamics of worker earnings across differently concentrated markets. Exploiting tax reforms to union due deductions as exogenous shocks to unionization, we demonstrate that there is a steep unionization gradient over labor market concentration. We show that there is an equally steep gradient in the union wage premium over concentration and that the premium loads almost exclusively on highly concentrated markets. This result implies a potentially important role of unions as alleviating market failures induced by imperfect competition. To validate our findings and examine robustness to different types of shocks, we extend the analysis by exploiting the emergence of import competition from China as an exogenous shock to employer concentration. This analysis suggest that the negative earnings effect of labor market concentration is eliminated upon reaching a union density of approximately 63 percent at the firm.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9495

Classification and Topics

• Classification: Wirtschaft ; Labor Demand ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Monopsony; Segmented Labor Markets ; Trade Unions: Objectives, Structure, and Effects ; Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining ; Labor Turnover; Vacancies; Layoffs
• Subject: monopsony ; skills ; unions ; market power

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dodini, Samuel ; Salvanes, Kjell ; Willén, Alexander L.P.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/252012
• Last update: 10.03.2025, 11:44 AM CET