Labor Market Power

Arbeitspapier

What are the welfare implications of labor market power? We provide an answer to this question in two steps: (1) we develop a tractable quantitative, general equilibrium, oligopsony model of the labor market, (2) we estimate key parameters using within-firm-state, across-market differences in wage and employment responses to state corporate tax changes in U.S. Census data. We validate the model against recent evidence on productivity-wage pass-through, and new measurements of the distribution of local market concentration. The model implies welfare losses from labor market power that range from 2.9 to 8.0 percent of lifetime consumption. However, despite large contemporaneous losses, labor market power has not contributed to the declining labor share. Finally, we show that minimum wages can deliver moderate, and limited, welfare gains by reallocating workers from smaller to larger, more productive firms.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 12276

Classification and Topics

• Classification: Wirtschaft ; Monopsony; Segmented Labor Markets
• Subject: wage setting ; market structure ; labor markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Berger, David ; Herkenhoff, Kyle ; Mongey, Simon
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/196774
• Last update: 10.03.2025, 11:44 AM CET