Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/252012 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9495
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper brings together the modern literatures on monopsony power and labor unions by empirically examining the effects of unionization on the dynamics of worker earnings across differently concentrated markets. Exploiting tax reforms to union due deductions as exogenous shocks to unionization, we demonstrate that there is a steep unionization gradient over labor market concentration. We show that there is an equally steep gradient in the union wage premium over concentration and that the premium loads almost exclusively on highly concentrated markets. This result implies a potentially important role of unions as alleviating market failures induced by imperfect competition. To validate our findings and examine robustness to different types of shocks, we extend the analysis by exploiting the emergence of import competition from China as an exogenous shock to employer concentration. This analysis suggest that the negative earnings effect of labor market concentration is eliminated upon reaching a union density of approximately 63 percent at the firm.
Subjects: 
monopsony
skills
unions
market power
JEL: 
J23
J24
J42
J51
J52
J63
Document Type: 
Working Paper
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