Granular Search, Market Structure, and Wages

Series

Macro Seminars
Speaker(s)

Gregor Jarosch (Princeton University, United States)
Field

Macroeconomics

Location

Tinbergen Institute (Gustav Mahlerplein 117), Room 1.01
Amsterdam
Date and time

October 25, 2019
16:00 - 17:15

We build a model where ﬁrm size is a source of labor market power. The key mechanism is that a granular employer can eliminate its own vacancies from a worker’s outside option in the wage bargain. Hence, a granular employer does not compete with itself. We show how wages depend on employment concentration and then use the model to quantify the eﬀects of granular market power. In Austrian micro-data, we ﬁnd that granular market power depresses wages by about ten percent and can explain 40 percent of the observed decline in the labor share from 1997 to 2015. Mergers decrease competition for workers and reduce wages even at non-merging ﬁrms.
Joint with Jan Sebastian Nimczik and Isaac Sorkin.