Identifying Labor Market Power: A Quasi-Experimental Approach

JoaÞo Galindo da Fonseca and Rogerio Santarrosa

No 14084, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: We test whether firms react to changes in the wages and size of their competitors. We use a unique institutional feature of public procurement auctions in Brazil: the moment in which the auction ends is random. For close auctions, winner and runner-up are as good as randomly assigned. We first show that firm-specific demand shocks lead to increases in the size and wages of the firm receiving the shock. Then, we document that these firm-specific demand shocks lead to increased wages of other (competing) firms in the same local labor market. We do not find negative effects on competitors' firm size. The effects are driven by competing firms responding to demand shocks from firms with high labor market share.

JEL-codes: J01 J23 J30 (search for similar items in EconPapers)
Date: 2025-04
New Economics Papers: this item is included in nep-com and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:14084

DOI: 10.18235/0013485

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