Labor Market Power

By David Berger, Kyle F. Herkenhoff, S. Mongey. Social Science Research Network, 2019

322 citations recorded by the source corpus.

We develop, estimate, and test a tractable general equilibrium model of oligopsony with differentiated jobs and concentrated labor markets. We estimate key model parameters by matching new evidence on the relationship between firms’ local labor market share and their employment and wage responses to state corporate tax changes. The model quantitatively replicates quasi-experimental evidence on imperfect productivity-wage pass-through and strategic wage setting of dominant employers. Relative to the efficient allocation, welfare losses from labor market power are 7.6 percent, while output is 20.9 percent lower. Lastly, declining local concentration added 4 percentage points to labor’s share of income between 1977 and 2013. (JEL E25, H71, J24, J31, J42, R23)

View Paper: https://www.semanticscholar.org/paper/85a787ad8f2132c1a55794aef97ed6fb724b7299

Citations in the corpus

• Diverging Trends in National and Local Concentration (2018, unknown): “Berger et al. (2019) also develop an equilibrium model of the US labor market and find that, although there are large welfare gains from increasing competition, in their framework market power is unable to explain the decline in the labor share.”