Labor Market Concentration, Wages and Business Cycles
Paper Session
Sunday, Jan. 7, 2024 1:00 PM - 3:00 PM (CST)
- Chair: Andreas Mueller, University of Texas-Austin
Internal and External Labor Markets and Declining Dynamism
Abstract
Over the last four decades, employment composition has shifted towards large firms in the US. This has occurred amidst a decline in employer-to-employer transitions. A natural question is, are workers in large firms climbing job ladders internally rather than externally? Using data from various supplements of the Current Population Survey, I find evidence of the prevalence of internal job ladders within large firms. I document that job stayers in large firms, relative to small ones, realize a larger annual pay growth and a higher probability of internal job switching. Accounting for internal job ladders amplifies labor market dynamism and offsets part of the decline in external employer-to-employer switching rates. At the same time, there has been a decreasing trend in the rate of internal job switching, suggesting that the forces affecting declining external dynamism could have also had implications on internal job ladders. I hypothesize that the decline in internal dynamism could be driven by the firm's endogenous response to decreasing labor market competition.Labor Market Concentration and the Cyclicality of Real Wages
Abstract
This paper studies the cyclical movement of real wages of new and existing hires in local labor markets, using matched employer-employee data from Austria for the period 1976-2019. We define local labor markets by their industry-region classification and index local labor markets by their local labor market concentration as measured by the Herfindahl Index of hires or employment. Similar to Jarosch, Nimczik and Sorkin (2023), we find a U-shaped pattern of the trend of local labor market concentration over the sample period and show that more concentrated markets on average exhibit lower wage levels. We probe whether the cyclicality of real wages is attenuated in more concentrated labor markets and relate our findings to theories of imperfect competition in the labor market.An Empirical Framework for Matching with Imperfect Competition
Abstract
This paper considers a static, many-to-one matching model of the labor market. We assume that firms operate in an oligopsony labor market and allow for strategic interactions in wage setting. Firms face inelastic labor supply curves and set an endogenous firm-specific markdown below marginal product. We provide a tractable characterization of the equilibrium and demonstrate existence and uniqueness. This characterization of the model equilibrium allows us to derive a rich set of comparative statics and then to gauge the relative contributions of worker skill, preference for amenities and strategic interaction on equilibrium wage inequality. We establish identification of labor demand and supply structural parameters and estimate them using matched employer-employee data on the population of Danish workers.Merger Guidelines for the Labor Market
Abstract
While the labor market implications of mergers have been historically ignored as “out of market” effects, recent actions by the Department of Justice (DOJ) place buyer market power (i.e., monopsony) at the forefront of antitrust policy. We develop a theory of multi-plant ownership and monopsony to help guide this new policy focus. We estimate the model using U.S. Census data and demonstrate the model’s ability to replicate empirically documented paths of employment and wages following mergers. We then simulate a representative set of U.S. mergers in order to evaluate merger review thresholds. Our main exercise applies the DOJ and FTC’s product market concentration thresholds to local labor markets. Assuming mergers generate efficiency gains of 5 percent, our simulations suggest that workers are harmed, on average, under the enforcement of the more lenient 2010 merger guidelines and unharmed, on average, under enforcement of the more stringent 1982 merger guidelines. We also provide a framework for further research evaluating alternative concentration thresholds based on assumptions about the efficiency effects of mergers and the resource constraints of regulators. Finally, we provide guidance for using the Gross Downward Wage Pressure method for evaluating the impact of mergers on labor markets.JEL Classifications
- J4 - Particular Labor Markets
- J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers