Monopsony, Job Tasks, and Labor Market Concentration

92 Pages Posted: 9 Jan 2023 Last revised: 14 Apr 2023

See all articles by Samuel Dodini

Samuel Dodini

Norwegian School of Economics (NHH)

Michael Lovenheim

Cornell University - Department of Policy Analysis and Management; National Bureau of Economic Research (NBER)

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics; IZA Institute of Labor Economics

Alexander Willén

Norwegian School of Economics (NHH) - Department of Economics

Date Written: January 2023

Abstract

This paper extends the literature on monopsony and labor market concentration by taking a task-based approach and estimating the causal effect of concentration in the demand for skills on labor market outcomes. The prior literature has focused on industry and occupation concentration and likely overstates the degree of monopsony power, since worker skills are substitutable across different firms, occupations, and industries. Exploiting linked employer-employee data that cover the universe of Norwegian workers over time, we find that our job task-based measure shows lower degrees of concentration than the conventional industry-and occupation-based measures. We also find that the gender gap in concentration is substantially larger using this measure. Exploiting mass layoffs and establishment closures as exogenous shocks to local labor demand, we show that workers who experience a mass separation have substantially worse subsequent labor market outcomes when they are in more concentrated labor markets defined by skill clusters. Our results point to the existence of employer market power in the economy that is driven by the concentration of skill demand across firms.

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Suggested Citation

Dodini, Samuel and Lovenheim, Michael and Salvanes, Kjell G. and Willén, Alexander, Monopsony, Job Tasks, and Labor Market Concentration (January 2023). NBER Working Paper No. w30823, Available at SSRN: https://ssrn.com/abstract=4320571 or http://dx.doi.org/10.2139/ssrn.4320571

Samuel Dodini (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
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Michael Lovenheim

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 5 595 9315 (Phone)
+47 5 595 9543 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Alexander Willén

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

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