Granular Search, Market Structure, and Wages

Gregor Jarosch and Jan Sebastian Nimczik
Authors registered in the RePEc Author Service: Isaac Sorkin

No 14231, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We build a model where firm size is a source of labor market power. The key mechanism is that a granular employer can eliminate its own vacancies from a worker's outside option in the wage bargain. Hence, a granular employer does not compete with itself. We show how wages depend on employment concentration and then use the model to quantify the effects of granular market power. In Austrian micro-data, we find that granular market power depresses wages by about ten percent and can explain 40 percent of the observed decline in the labor share from 1997 to 2015. Mergers decrease competition for workers and reduce wages even at non-merging firms.

Date: 2019-12
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (42)

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Related works:
Journal Article: Granular Search, Market Structure, and Wages (2024)
Working Paper: Granular Search, Market Structure, and Wages (2021)
Working Paper: Granular Search, Market Structure, and Wages (2019)
Working Paper: Granular Search, Market Structure, and Wages (2019)
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