Granular Search, Market Structure, and Wages

Arbeitspapier

We build a model where firm size is a source of labor market power. The key mechanism is that a granular employer can eliminate its own vacancies from a worker's outside option in the wage bargain. Hence, a granular employer does not compete with itself. We show how wages depend on employment concentration and then use the model to quantify the effects of granular market power. In Austrian micro-data, we find that granular market power depresses wages by about ten percent and can explain 40 percent of the observed decline in the labor share from 1997 to 2015. Mergers decrease competition for workers and reduce wages even at non-merging firms.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 12574

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Monopsony; Segmented Labor Markets
• Subject: market power ; labor share ; search and matching

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jarosch, Gregor ; Nimczik, Jan Sebastian ; Sorkin, Isaac
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/207400
• Last update: 10.03.2025, 11:41 AM CET