Labor Market Power

David Berger, Kyle Herkenhoff and Simon Mongey

No 25719, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: To measure labor market power in the US economy, we develop a tractable quantitative, general equilibrium, oligopsony model of the labor market. We estimate key model parameters by matching the firm-level relationship between labor market share and employment size and wage responses to state corporate tax changes. The model quantitatively replicates quasi-experimental evidence on (i) imperfect productivity-wage pass-through, (ii) strategic behavior of dominant employers, and (iii) the local labor market impact of mergers. We then measure welfare losses relative to the efficient allocation. Accounting for transition dynamics, we quantify welfare losses from labor market power relative to the efficient allocation as roughly 6 percent of lifetime consumption. An analytical decomposition attributes equal parts to dead-weight losses and misallocation. Lastly, we find that declining local concentration added 4 ppt to labor’s share of income between 1977 and 2013.

JEL-codes: E2 J2 J42 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
Note: EFG LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

Published as David Berger & Kyle Herkenhoff & Simon Mongey, 2022. "Labor Market Power," American Economic Review, vol 112(4), pages 1147-1193.

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Related works:
Journal Article: Labor Market Power (2022)
Working Paper: Labor Market Power (2021)
Working Paper: Labor Market Power (2019)
Working Paper: Labor Market Power (2019)
Working Paper: Labor Market Power (2019)
Working Paper: Labor Market Power (2018)
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