Labor Market Power and Between-Firm Wage (In)Equality

Matthias Mertens

International Journal of Industrial Organization, 2023, vol. 91, issue C

Abstract: I study how labor market power affects firm wage differences using German manufacturing sector firm-level data (1995-2016). In past decades, labor market power increasingly moderated rising between-firm wage differences. This is because high-paying firms possess high and increasing labor market power and pay wages below competitive levels, whereas low-wage firms pay competitive or even above competitive wages. Over time, large, high-wage, high-productivity firms generate increasingly large labor market rents while charging comparably low product markups. This provides novel insights on why such top firms are profitable and successful. Using micro-aggregated data covering most economic sectors, I validate key results for multiple European countries.

Keywords: Firm wage differences; labor market power; monopsony; rent-sharing (search for similar items in EconPapers)
JEL-codes: J31 J42 L10 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:91:y:2023:i:c:s0167718723000863

DOI: 10.1016/j.ijindorg.2023.103005

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