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Research ArticleArticle
Open Access

Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?

Efraim Benmelech, Nittai K. Bergman and Hyunseob Kim
Published online before print December 14, 2020, 0119-10007R1; DOI: https://doi.org/10.3368/jhr.monopsony.0119-10007R1
Efraim Benmelech
Harold L. Stuart Professor of Finance at the Kellogg School of Management, Northwestern University.
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Nittai K. Bergman
Professor of Economics at the Berglas School of Economics and Coller School of Management, Tel Aviv University.
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Hyunseob Kim
Assistant Professor of Finance at the Johnson Graduate School of Management, Cornell University.
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Abstract

We analyze the effect of local-level labor market concentration on wages. Using plant-level U.S. Census data during 1978–2016, we find that: (1) local-level employer concentration exhibits substantial cross-sectional variation; (2) consistent with labor market monopsony power, there is a negative relation between local-level employer concentration and wages that strengthens over time; (3) instrumenting concentration with merger activity shows that increased employer concentration decreases wages; (4) the negative relation between employer concentration and wages increases when unionization rates are low; and (5) the link between productivity growth and wage growth is stronger when labor markets are less concentrated. Our results emphasize the role of local labor market monopsonies in influencing firm wage-setting.

This open access article is distributed under the terms of the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0) and is freely available online at: http://jhr.uwpress.org

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Journal of Human Resources: 58 (3)
Journal of Human Resources
Vol. 58, Issue 3
1 May 2023
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Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?
Efraim Benmelech, Nittai K. Bergman, Hyunseob Kim
Journal of Human Resources Dec 2020, 0119-10007R1; DOI: 10.3368/jhr.monopsony.0119-10007R1

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Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages?
Efraim Benmelech, Nittai K. Bergman, Hyunseob Kim
Journal of Human Resources Dec 2020, 0119-10007R1; DOI: 10.3368/jhr.monopsony.0119-10007R1
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