Labor Market Power

86 Pages Posted: 1 Apr 2019

See all articles by David Berger

David Berger

Northwestern University

Kyle Herkenhoff

University of Minnesota - Minneapolis

Simon Mongey

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: March 2019

Abstract

We develop a tractable quantitative, general equilibrium, oligopsony model of the labor market that we use to measure the macroeconomic implications of labor market power. Strategic interaction complicates inference of parameters that are key to this exercise. To address this challenge, we contribute estimates of market share dependent wage and employment responses to state corporate tax changes in U.S. Census data, which we combine with the structure of the model. We validate against the distribution of local labor market concentration and quasi-experimental evidence on productivity-wage pass-through. Relative to a counterfactual competitive economy, and accounting for transition dynamics, we measure welfare losses from labor market power to be roughly 5 percent of lifetime consumption. Minimum wage and merger experiments caution that concentration and welfare may not negatively comove.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Berger, David and Herkenhoff, Kyle and Mongey, Simon, Labor Market Power (March 2019). NBER Working Paper No. w25719. Available at SSRN: https://ssrn.com/abstract=3363455

David Berger (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Kyle Herkenhoff

University of Minnesota - Minneapolis ( email )

110 Wulling Hall, 86 Pleasant St, S.E.
308 Harvard Street SE
Minneapolis, MN 55455
United States

Simon Mongey

University of Chicago ( email )

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
11
Abstract Views
423
PlumX Metrics