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Labor Market Power

David Berger (), Kyle Herkenhoff () and Simon Mongey
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David Berger: Northwestern University

No 2019-027, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: What are the welfare implications of labor market power? We provide an answer to this question in two steps: (1) we develop a tractable quantitative, general equilibrium, oligopsony model of the labor market, (2) we estimate key parameters using within-firm-state, across-market differences in wage and employment responses to state corporate tax changes in U.S. Census data. We validate the model against recent evidence on productivity-wage pass-through, and new measurements of the distribution of local market concentration. The model implies welfare losses from labor market power that range from 2.9 to 8.0 percent of lifetime consumption. However, despite large contemporaneous losses, labor market power has not contributed to the declining labor share. Finally, we show that minimum wages can deliver moderate, and limited, welfare gains by reallocating workers from smaller to larger, more productive firms.

Keywords: wage setting; market structure; labor markets (search for similar items in EconPapers)
JEL-codes: E20 J20 J42 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
Note: M
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Berger ... bor-market-power.pdf First version, April 12, 2019 (application/pdf)

Related works:
Working Paper: Labor Market Power (2019) Downloads
Working Paper: Labor Market Power (2019) Downloads
Working Paper: Labor Market Power (2019) Downloads
Working Paper: Labor Market Power (2018) Downloads
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