Labor Market Power Research Articles

Trade liberalization and labor monopsony: Evidence from Chinese firms

We document that larger input tariff reductions were associated with lower labor markdowns in China, especially for skill-intensive firms. Guided by a stylized model of equilibrium labor market power, we leverage differences in the aggregate labor supply dynamics across labor markets—such as regional variations in China’s contemporaneous college expansion reforms—to that show trade-induced labor markdown decreased more in labor markets with more labor supply growth. Our estimates suggest that lower labor markdowns due to input trade liberalization offset China’s aggregate labor share decline by almost one-half percentage point in the early 2000s.

Market power and wages: evidence from Brazil

PurposeThe paper examines the impact of market power on wages within the context of a developing country, focusing on Brazil.Design/methodology/approachWith access to matched employer–employee data from Brazil, we first characterized the evolution of the local labor market concentration (Municipality Herfindahl–Hirschman Index [HHI]). Then, we built a fixed-effect model with instrumental variables to verify the association between the local labor market concentration and wages. Finally, a difference-in-difference (DiD) was implemented to verify whether a merger transaction impacted the workers’ earnings in the Brazilian banking sector.FindingsThe paper’s findings suggest that there may be a negative relationship between market power and workers’ earnings.Originality/valueThis research conducted an in-depth investigation of the labor market power in a developing country. As far as we know, our work is the first to evaluate the extension of local concentration in Brazilian formal labor markets and to illustrate its evolution over the last decades. Additionally, when going through the effects of market concentration on wages, we use a new identification strategy that explores changes in the HHI that are caused by national trends in an industry as a source of exogenous variation. Finally, the last part of the paper assesses the effects of antitrust policy on the labor market, a kind of investigation that is still scarce.

Measuring Labor Market Power in Developing Countries: Evidence from Colombian Plants

Previous articleNext article No AccessMeasuring Labor Market Power in Developing Countries: Evidence from Colombian PlantsFrancesco Amodio and Nicolás de RouxFrancesco Amodio Search for more articles by this author and Nicolás de Roux Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Labor Economics Just Accepted Published for the Society of Labor Economists, Economics Research Center/ NORC Article DOIhttps://doi.org/10.1086/725248 Views: 27Total views on this site HistoryAccepted March 28, 2023 © 2023 The University of Chicago. All Rights reserved.PDF download Crossref reports no articles citing this article.

Trade liberalization, labor market power, and misallocation across firms: Evidence from China's WTO accession

This paper studies the impact of trade liberalization on the heterogeneity of labor market power among manufacturing firms, which is a potential source of misallocation. The model shows that heterogeneity of labor market power distorts the allocation of the factors of production, and the variance in the natural log of the markdown serves as a sufficient statistic to infer its negative impact on overall production efficiency. Using China's accession to the World Trade Organization (WTO) as a natural experiment, the empirical results suggest that lower input tariffs decrease the variance in the natural log of the markdown, which reflects the improvement in misallocation. In contrast, reductions in output tariffs have no significant effects.

The Influence of Labor Market Power in the Audit Profession

ABSTRACT This paper examines the influence of labor market power in the audit profession. Using a dataset of online job postings, we confirm that audit offices in more concentrated labor markets have greater labor market power and exercise it in the form of higher skill requirements and greater required effort from their auditors, at similar or slightly lower wages. We then show that client firms of audit offices in more concentrated labor markets are less likely to restate their earnings and have lower absolute discretionary accruals. These findings are only present when employees have lower mobility across professions and geographies, consistent with audit offices’ power in the local labor market explaining the results. Collectively, our findings highlight the importance of labor market power in understanding audit quality. Data Availability: Data are available from the sources cited in the text. JEL Classifications: J31; J40; J42; M42; M55.

The Effect of Export Market Access on Labor Market Power: Firm-level Evidence from Vietnam

We examine the impact of an export market expansion created by the US-Vietnam Bilateral Trade Agreement (BTA) on labor market competition among Vietnamese manufacturing firms. We measure distortionary wedges between equilibrium marginal revenue products of labor (MRPL) and wages nonparametrically and find that the median firm pays workers 59% of their MRPL. The BTA permanently decreases labor market distortion in manufacturing by 3.4%, mainly for domestic private firms. The median distortion is 26% higher for women than men, and the decline in distortion for women drives the overall distortion reduction. We shed some light on the mechanisms for these results.

The impact of trade liberalization on firms’ product and labor market power

Abstract This paper examines the impact of trade liberalization on firms’ product and labor market power. We estimate the prevalence and intensity of price-cost markups and either wage markups or wage markdowns, taking the dependence between these model-consistent measures of product and labor market power into account. Exploiting reductions in tariffs upon China’s World Trade Organization accession, we find that trade liberalization has not switched firms away from exercising product and labor market power. Reducing input tariffs has widened price-cost markups, narrowed wage markdowns, and widened wage markups at the firm level. We reveal heterogeneous trade liberalization effects on the intensity of firms’ product and labor market power.

Unraveling the Wage-Output Disconnect: The Role of Labor Market Power

Unraveling the Wage-Output Disconnect: The Role of Labor Market Power

Monopsony Amplifies Distortions from Progressive Taxes

Progressive income taxes distort hiring and wages when firms have labor market power. We characterize this novel monopsony cost of progressivity in a simple monopsony economy and derive efficiency wedges that depend on progressivity. A simple quantification of these wedges points to the possibility that the monopsony cost may be of similar magnitudes to redistribution and insurance benefits.

Nominal wage patterns, monopsony, and labour market power in early modern England

AbstractRecords of long‐eighteenth‐century English wage rates exhibit almost absolute nominal rigidity over many decades, alongside significant dispersion between the wages paid by different organizations for the same type of work in the same location. These features of preindustrial wages have been obscured by data aggregation and the construction of real wage series, which introduce variation. In this paper, we argue that the standard explanations for wage rigidity in economic history are insufficient. We show econometric evidence for monopsony power in one major organization and argue that the main historical wage series are also affected by employer power. Eighteenth‐century England had an imperfectly competitive labour market with large frictions. This gave large organizations the power to set wage policies. We discuss the implications for the eighteenth‐century British economy and research into long‐run wages more generally.

Labor market power and worker turnover

The last two decades have seen a significant decrease in labor market turnover and an increase in labor market concentration. We investigate whether labor market power, as manifested by employer concentration and outside options, affect turnover rates. Utilizing online vacancy posting data, we find that moving from the 25th percentile to 75th percentile of employer concentration reduces the turnover rate by 5%, driven by high-school workers in low-skill industries. The same exercise for outside options implies a 39% increase in the turnover rate, driven by workers in high-skill industries.

Community resilience building in disadvantaged neighbourhoods (DN): action learning and political work

ABSTRACT Old, often neglected downtown neighborhoods are usually the salt of the city, the center of its original culture, and the area of an authentic community anchored in traditional values as: an ethos of work, loyalty, multi-generational family, independence. In the process of city regeneration, instead of making urban space more attractive, such neighborhoods are treated as an obstacle and therefore subjected to various forms of oppression (spatial, political, discursive). On the basis of those negative diagnoses, a project of participatory action and learning has been constructed, the goal of which is individual and structural empowerment of disadvantaged neighborhoods (communities) as well as action learning opportunities for social work/social pedagogy students. The locality development makes communities more effective in resisting the oppression of large municipal investments. The plan assumed a joint action (academics, practitioners, students, city officers, inhabitants) of rebuilding the historical and social pride of the communities and then including them as active and important elements of the city also in terms of the labor market and political power. Other important goals were a participatory model of social work education (field-based research learning) and an increase in social recognition of disadvantaged neighborhoods (political result).

The Effect of Export Market Access on Labor Market Power: Firm-Level Evidence from Vietnam

The Effect of Export Market Access on Labor Market Power: Firm-Level Evidence from Vietnam

The Dynamics of Product and Labor Market Power: Evidence from Lithuania

The Dynamics of Product and Labor Market Power: Evidence from Lithuania

Demographics, Labor Market Power and the Spatial Equilibrium

Demographics, Labor Market Power and the Spatial Equilibrium

The Influence of Labor Market Power in the Audit Profession

The Influence of Labor Market Power in the Audit Profession

A Comment on: “Walras–Bowley Lecture: Market Power and Wage Inequality” by Shubhdeep Deb, Jan Eeckhout, Aseem Patel, and Lawrence Warren

A burgeoning literature in labor economics is focused on modeling employer labor market power, generally finding nontrivial estimates of monopsony power. A smaller literature also simultaneously incorporates product market power. Deb, Eeckhout, Patel, and Warren (2024) is an example of applying an oligopoly‐oligopsony model to the U.S. labor market, arguing for important effects on wage levels and inequality from rising market power. I support combining IO and labor as a fruitful way of studying wages and business dynamism, but argue for looking more broadly at (i) differential degrees of employer power in labor and product markets; (ii) investigating the dynamic sources of markups (e.g., through innovation), and (iii) considering wage bargaining models, not just wage posting models, which have some starkly different implications for wage setting.

Global Labor Market Power

Global Labor Market Power

Walras–Bowley Lecture: Market Power and Wage Inequality

We propose a theory of how market power affects wage inequality. We ask how goods and labor market power jointly determine the level of wages, the skill premium, and wage inequality. We then use detailed microdata from the U.S. Census Bureau between 1997 and 2016 to estimate the parameters of labor supply, technology, and the market structure. We find that a less competitive market structure lowers the average wage of high‐skilled workers by 11.3%, and of low‐skilled workers by 12.2%, contributes 8.1% to the rise in the skill premium, and accounts for 54.8% of the increase in between‐establishment wage variance.

Monopsony power in the United States: Evidence from the great depression

This paper presents evidence that firms had labor market power during the early 1930s. Using plant-level data from the Census of Manufactures between 1929 and 1935, I construct a Herfindahl-Hirschman Index of local labor market concentration at the State-Economic-Area-by-industry-by-occupation level. I find that local labor market concentration has a negative relationship with wages which is consistent with labor market monopsony power. The results are robust to excluding local labor markets with one firm, excluding industries with local product markets, as well as the inclusion of industry characteristic, SEA, and occupational time trends. I find evidence that New Deal minimum wage policies weakened monopsony power. I also find suggestive evidence that high unemployment rates during 1930 reduced workers’ bargaining power.