The Dynamics of Power in Labor Markets: Monopolistic Unions versus Monopsonistic Employers

Samuel Dodini, Kjell Salvanes, Alexander L.P. Willén and Kjell G Salvanes

No 9495, CESifo Working Paper Series from CESifo

Abstract: This paper brings together the modern literatures on monopsony power and labor unions by empirically examining the effects of unionization on the dynamics of worker earnings across differently concentrated markets. Exploiting tax reforms to union due deductions as exogenous shocks to unionization, we demonstrate that there is a steep unionization gradient over labor market concentration. We show that there is an equally steep gradient in the union wage premium over concentration and that the premium loads almost exclusively on highly concentrated markets. This result implies a potentially important role of unions as alleviating market failures induced by imperfect competition. To validate our findings and examine robustness to different types of shocks, we extend the analysis by exploiting the emergence of import competition from China as an exogenous shock to employer concentration. This analysis suggest that the negative earnings effect of labor market concentration is eliminated upon reaching a union density of approximately 63 percent at the firm.

Keywords: monopsony; skills; unions; market power (search for similar items in EconPapers)
JEL-codes: J23 J24 J42 J51 J52 J63 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-lma and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: The Dynamics of Power in Labor Markets: Monopolistic Unions versus Monopsonistic Employers (2022)
Working Paper: The Dynamics of Power in Labor Markets: Monopolistic Unions versus Monopsonistic Employers (2021)
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