CEPII, Recherche et Expertise sur l'economie mondiale
The Heterogenous Effects of Employers’ Concentration on Wages: Better Sorting or Uneven Rent Extracting?

Axelle Arquié
Julia Bertin

 Highlights :
  • Labor market concentration decreases average wage and increases inequality between jobs in the same local labor market.
  • Labor market concentration decreases wages of jobs and average wage of all firms along the wage distribution, even on the largest markets.
  • We investigate two possible mechanisms linking labor market concentration and wage inequality.

 Abstract :
We show empirically for France that labor market concentration decreases wages heterogeneously, with the lowest earners being the most vulnerable, and increases local wage inequality within occupations. If concentration allows employers to improve worker selection, both inequality and efficiency gains could materialize. However, based on a simple formalization, we interpret the findings that employer concentration increases within-firm inequality and decreases between-firm inequality as evidence against such a sorting mechanism. We also find evidence that employer concentration does not increase positive assortative matching. The results therefore suggest that concentration increases inequality through the relatively reduced bargaining position of the lowest earners.

 Keywords : Labor Market Concentration | Inequality | Sorting

 JEL : J31, J42
CEPII Working Paper
N°2022-09, October 2022

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