Wages, Market Power and Labor Productivity: Evidence from Uruguay

Carlos Casacuberta and Néstor Gandelman

No 13987, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper examines the relationship between wages and market power at the firm level. We derive firm-specific measures of labor market power and present a natural decomposition of wage changes into shifts in labor market power and labor productivity. Our findings indicate that 50-60 percent of the variation in nominal wages is attributable to price changes, while the remaining portion, reflecting changes in real wages, is explained mainly by changes in market power and, to a lesser extent, by changes in labor productivity. Moreover, we show that firms with greater market power tend to pay higher wages, suggesting rent-sharing between employers and employees, at the cost of higher prices for consumers.

Keywords: Price Markups; Labor market power (search for similar items in EconPapers)
JEL-codes: L10 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-com, nep-eff, nep-ind, nep-lma and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:13987

DOI: 10.18235/0013408

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