From Product Concentration to Local Labor Market Outcomes: The Effect on Industry Wages
37 Pages Posted: 31 Dec 2019 Last revised: 9 Jan 2020
Date Written: July 1, 2019
In this paper, I examine whether higher product market power can affect labor earnings through its effect on overall labor demand in distinct markets, as a set of dominant firms replaces employment by competitors. To identify relative labor demand shifts, I focus on variations in the spatial concentration within an industry following increases in market power. I find that the increase in sales and labor shares by top 4 firms cannot predict the direction of wage adjustment, but changes in spatial concentration are consistent with observed wage adjustments. Wages increase in industries where employment becomes more geographically concentrated within a set of local markets. In contrast, wages decline when rising sales and employment shares by top 4 firms reduce the geographic labor concentration.
Keywords: Labor Market Concentration, Product Market Concentration, Wages, Spatial Concentration, Market Power
JEL Classification: J23, J30, J42
Suggested Citation: Suggested Citation