Granular Search, Market Structure, and Wages

Gregor Jarosch (), Jan Sebastian Nimczik () and Isaac Sorkin
Additional contact information
Gregor Jarosch: Princeton University
Jan Sebastian Nimczik: European School of Management and Technology (ESMT)

No 12574, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: search and matching; labor share; market power (search for similar items in EconPapers)
JEL-codes: J31 J42 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2019-08
New Economics Papers: this item is included in nep-com, nep-lma and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

Published - published in: Review of Economic Studies, 2024, 91 (6), 3569 - 3607

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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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