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Labour market power and between-firm wage (in)equality

Matthias Mertens

No 1/2020, IWH-CompNet Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: I study how labour market power affects firm wage differences using German manufacturing sector firm-level data (1995-2016). In past decades, labour market power increasingly moderated rising between-firm wage inequality. This is because high-paying firms possess high and increasing labour market power and pay wages below competitive levels, whereas low-wage firms pay competitive wages. Over time, large, high-wage, high-productivity firms generate increasingly large labour market rents while selling on competitive product markets. This provides novel insights on why such "superstar firms" are profitable and successful. Using micro-aggregated data covering most economic sectors, I validate my results for ten other European countries.

Keywords: inequality; labour market power; monopsony; rent-sharing; superstar firms (search for similar items in EconPapers)
JEL-codes: J31 J42 L10 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-eur, nep-lma and nep-tid
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Working Paper: Labour market power and between-firm wage (in)equality (2021) Downloads
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