Unions, Industrial Concentration, and Economic Rents: How the Wagner Act increased wages during the 1930s

Abstract

Using a differences-in-differences model, I find evidence that a structural change between wages and industrial concentration occurred in the winter of 1936-1937. This structural change likely occurred due to the National Labor Relations Act, commonly known as the Wagner Act, increasing the bargaining power of unions, allowing them to obtain a larger share of economic rents originating from imperfect competition. Because there were no relative changes in employment as wages increased, this suggests that the economic rents that unions and firms bargained over originated from frictions in both labor and product markets. I also find evidence that this structural change led to a decline in within-industry wage inequality between white-collar and blue-collar employees.

Keywords: Industrial Concentration, Unions, National Labor Relations Act, Wagner Act

JEL Classification: N32, N42, J51