Wages, Hires, and Labor Market Concentration

Abstract

How does employer market power affect workers? We compute the concentration of new hires by occupation and commuting zone in France using linked employer-employee data. Using instrumental variables with worker and firm fixed effects, we find that a 10% increase in labor market concentration decreases hires by 12.4% and the wages of new hires by nearly 0.9%, as hypothesized by monopsony theory. Based on a simple merger simulation, we find that a merger between the top two employers in the retail industry would be most damaging, with about 24 million euros in annual lost wages for new hires, and an 8000 decrease in annual hires.

Keywords: Labor Market Concentration, Wages, Hires, Merger Simulation

JEL Classification: J31, J32, J42, L13, J51, L40, L41, L44