Wage Setting in Multiproduct Firms

Jackie M.L. Chan, Michael Irlacher, Michael Koch and Luca Macedoni

No 11674, CESifo Working Paper Series from CESifo

Abstract: This paper identifies product scope as a new determinant of firm-level wage markdowns. Using Danish matched employer-employee data, we document a negative elasticity between wages and scope, which has a similar magnitude to the firm-size wage premium but the opposite sign. Additional empirical evidence suggests that workers are compensated by increased job security at multiproduct firms. We rationalize the scope wage discount using a theory where workers value the internal labor market, as they can switch across product lines instead of leaving the firm. This flexibility makes product scope an amenity, giving multiproduct firms monopsony power to offer lower wages.

Keywords: multiproduct firms; monopsony power; wages; amenities; labor share (search for similar items in EconPapers)
JEL-codes: D21 F10 J31 J42 L25 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-bec, nep-com, nep-hrm, nep-ind and nep-lma
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Working Paper: Wage Setting in Multiproduct Firms (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11674

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