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Labor Market Power

Author

Listed:
  • David Berger

    (Northwestern University)

  • Kyle Herkenhoff

    (University of Minnesota)

  • Simon Mongey

    (University of Chicago)

Abstract

We develop a general equilibrium oligopsony model of the US labor market. To parameterize the model we use Census data to estimate within-state-firm, across-region differences in the response of employment and wages to state corporate tax changes. We show that the distribution of wage-bill Herfindahls is a sufficient statistic for the aggregate labor share, and we document that the employment-weighted wage-bill Herfindahl fell from 1976 to 2014. After estimating our model to match 2014 levels of labor market concentration, we find that the welfare gains associated with a Walrasian equilibrium range from 4 to 18 percent. Lastly, we show that the model is able to capture the reallocation of employment across the distribution of firms in response to a minimum wage hike.

Suggested Citation

  • David Berger & Kyle Herkenhoff & Simon Mongey, 2019. "Labor Market Power," 2019 Meeting Papers 1231, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1231
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    More about this item

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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