Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry

Kory Kroft, Yao Luo, Magne Mogstad and Bradley Setzler

American Economic Review, 2025, vol. 115, issue 9, 2926-69

Abstract: We develop, identify, and estimate a model of imperfect competition in both labor and product markets. Our context is the US construction industry, where firms compete for workers, private market projects, and government procurements. Our empirical approach leverages bidding data from procurement auctions linked to employer-employee tax records. We find imperfect competition in both markets generates a total wage markdown of more than 30 percent and a total price markup of around 45 percent. By contrast, if one erroneously assumed a perfectly competitive product (labor) market, then one would conclude wages (prices) are marked down (up) by only 20 percent (16 percent).

JEL-codes: D21 D24 H76 J31 L13 L74 (search for similar items in EconPapers)
Date: 2025
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Related works:
Working Paper: Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry (2025)
Working Paper: Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry (2021)
Working Paper: Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry (2020)
Working Paper: Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry (2020)
Working Paper: Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry (2020)
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DOI: 10.1257/aer.20220577

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