Labor Market Concentration, Earnings, and Inequality

Abstract

I document trends in local industrial concentration from 1976 through 2015 and estimate effects of concentration on earnings outcomes. Local concentration generally declined over that period, unlike national concentration, which declined sharply in the early 1980s before increasing to nearly its original level beginning around 1990. Increased local concentration reduces earnings and increases inequality. Because average concentration has fallen, the 90/10 earnings ratio was six percent lower and earnings one percent higher in 2015 than they would have been if local concentration were at its 1976 level. Most demographic subgroups experience mean earnings reductions, and all experience increases in inequality.