Labor Market Powe

Journal Article (Journal Article)

We develop, estimate, and test a tractable general equilibrium model of oligopsony with differentiated jobs and concentrated labor markets. We estimate key model parameters by matching new evidence on the relationship between firms’local labor market share and their employment and wage responses to state corporate tax changes. The model quantitatively replicates quasi-experimental evidence on imperfect productivity-wage pass-through and strategic wage setting of dominant employers. Relative to the efficient allocation, welfare losses from labor market power are 7.6 percent, while output is 20.9 percent lower. Lastly, declining local concentration added 4 percentage points to labor’s share of income between 1977 and 2013. (JEL E25, H71, J24, J31, J42, R23)

Full Text

Duke Authors

Cited Authors

  • Berger, D; Herkenhoff, K; Mongey, S

Published Date

  • April 1, 2022

Published In

Volume / Issue

  • 112 / 4

Start / End Page

  • 1147 - 1193

Electronic International Standard Serial Number (EISSN)

  • 1944-7981

International Standard Serial Number (ISSN)

  • 0002-8282

Digital Object Identifier (DOI)

  • 10.1257/aer.20191521

Citation Source

  • Scopus