Employer Concentration and Labor Market Power

Abstract

We study how employment concentration in local labor markets relates to firm pay in Chilean matched employer–employee data for 2005–2019. Local labor markets are constructed from job-to-job flows using hierarchical agglomerative clustering, and concentration is instrumented with the leave-one-out mean of the log inverse number of employers in the same sector in other locations. We decompose the earnings–concentration coefficient exactly into worker composition, the marginal product of labor, and wage markdowns, to assess how much of the relationship reflects labor market power.

Agustin Diaz Casanueva

Senior Economist

I study how households make economic decisions about consumption, fertility, and labor supply in response to shocks and policy changes.