Working Paper: NBER ID: w30823
Authors: Samuel Dodini; Michael F. Lovenheim; Kjell G. Salvanes; Alexander Willn
Abstract: This paper extends the literature on monopsony and labor market concentration by taking a task-based approach and estimating the causal effect of concentration in the demand for skills on labor market outcomes. The prior literature has focused on industry and occupation concentration and likely overstates the degree of monopsony power, since worker skills are substitutable across different firms, occupations, and industries. Exploiting linked employer-employee data that cover the universe of Norwegian workers over time, we find that our job task-based measure shows lower degrees of concentration than the conventional industry-and occupation-based measures. We also find that the gender gap in concentration is substantially larger using this measure. Exploiting mass layoffs and establishment closures as exogenous shocks to local labor demand, we show that workers who experience a mass separation have substantially worse subsequent labor market outcomes when they are in more concentrated labor markets defined by skill clusters. Our results point to the existence of employer market power in the economy that is driven by the concentration of skill demand across firms.
Keywords: monopsony; labor market concentration; job tasks; wages; gender gap
JEL Codes: J23; J24; J42; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher concentration in the demand for specific job tasks (J29) | Steeper labor supply curve (J29) |
| Higher concentration in the demand for specific job tasks (J29) | Increased employer market power (J42) |
| Increased employer market power (J42) | Reduced wages on the intensive margin (J31) |
| Increased employer market power (J42) | Reduced hours on the intensive margin (J22) |
| Higher concentration in the demand for specific job tasks (J29) | Reduced skill upgrading (J24) |
| Higher concentration in the demand for specific job tasks (J29) | Increased skill downgrading (J24) |
| Higher concentration in the demand for specific job tasks (J29) | 16 percentage point decrease in skill mismatch (F66) |
| Higher concentration in the demand for specific job tasks (J29) | Varying negative earnings effects based on education level (I24) |
| Higher concentration in the demand for specific job tasks (J29) | Lower post-separation wages (J31) |