Labor Market Concentration

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IZA Discussion Paper No. 11254

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José Azar; Ioana Elena Marinescu; Marshall Steinbaum
monopsony; oligopsony; labor markets; competition policy
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paper description
A product market is concentrated when a few firms dominate the market. Similarly, a labor market is concentrated when a few firms dominate hiring in the market. Using data from the leading employment website, we calculate labor market concentration for over 8,000 geographic-occupational labor markets in the US. Based on the DOJ-FTC horizontal merger guidelines, the average market is highly concentrated. Using a panel IV regression, we show that going from the 25th percentile to the 75th percentile in concentration is associated with a 17% decline in posted wages, suggesting that concentration increases labor market power.