Working Paper: NBER ID: w24307
Authors: Efraim Benmelech; Nittai Bergman; Hyunseob Kim
Abstract: We analyze the effect of local-level labor market concentration on wages. Using Census data over the period 1977–2009, we find that: (1) local-level employer concentration exhibits substantial cross-sectional and time-series variation and increases over time; (2) consistent with labor market monopsony power, there is a negative relation between local-level employer concentration and wages that is more pronounced at high levels of concentration and increases over time; (3) the negative relation between labor market concentration and wages is stronger when unionization rates are low; (4) the link between productivity growth and wage growth is stronger when labor markets are less concentrated; and (5) exposure to greater import competition from China (the “China Shock”) is associated with more concentrated labor markets. These five results emphasize the role of local-level labor market monopsonies in influencing firm wage-setting behavior and can potentially explain some of the stagnation of wages in the United States over the past several decades.
Keywords: No keywords provided
JEL Codes: E24; J21; J23; J31; J42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local-level employer concentration (R32) | wages (J31) |
| high levels of employer concentration (J79) | wages (J31) |
| time (C41) | wages (J31) |
| labor market concentration (J42) | wages (J31) |
| productivity growth (O49) | wage growth (J31) |
| increased import competition from China (F69) | local labor market concentration (J49) |