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 increases inequality between jobs in the same firm ("within-firm inequality") and between the average wage in each firm ("between-firm inequality").
  • Labor market concentration decreases wages of jobs and average wage of all firms along the wage distribution, even on richest and largest markets.

 Abstract :
Are workers equal in front of employers' concentration? We show, using instrumental variable estimations for France between 2000 and 2019, that employers' concentration has a negative heterogenous effect on wage, with the lowest earners being the most vulnerable. This increased wage inequality could reflect some efficiency gains if concentration allows employers to impose a more demanding selection process, improving sorting i.e. workers selection, thus generating both inequality and higher productivity. We find, exploring within-firm and between-firm inequality, that it is not the case. Employers' concentration instead generates wage inequality by undercutting relatively more the bargaining power of the lowest earners.

 Keywords : Labor Market Concentration | Inequality | Sorting

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

Full text

BibTeX (with abstract),
plain text (with abstract),
RIS (with abstract)