Making Their Own Weather? Estimating Employer Labour-Market Power and Its Wage Effects

42 Pages Posted: 7 Sep 2023

See all articles by Pedro S. Martins

Pedro S. Martins

Nova School of Business and Economics; IZA Institute of Labor Economics; Global Labor Organization (GLO)

António P. Melo

University of Turin

Multiple version iconThere are 2 versions of this paper

Date Written: August 24, 2023

Abstract

The subdued wage growth observed in many countries has spurred interest in monopsony views of regional labour markets. This study measures the extent and robustness of employer power and its wage implications exploiting comprehensive matched employer-employee data. We find average (employment-weighted) Herfindhal indices of 800 to 1,100, stable over the 1986-2019 period covered, and that typically less than 9% of workers are exposed to concentration levels thought to raise market power concerns. When controlling for both worker and firm heterogeneity and instrumenting for concentration, we find that wages are negatively affected by employer concentration, with elasticities of around -1.4%. We also find that several methodological choices can change significantly both the measurement of concentration and its wage effects.

Keywords: Oligopsony, Wages, Regional labour markets, Worker mobility, Portugal

JEL Classification: J42, J31, J63

Suggested Citation

Martins, Pedro S. and Melo, António, Making Their Own Weather? Estimating Employer Labour-Market Power and Its Wage Effects (August 24, 2023). Nova SBE Working Paper Series No. 659, Available at SSRN: https://ssrn.com/abstract=4558064 or http://dx.doi.org/10.2139/ssrn.4558064

Pedro S. Martins (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

IZA Institute of Labor Economics

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

Global Labor Organization (GLO) ( email )

Collogne
Germany

António Melo

University of Turin ( email )

Turin
Italy

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