Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315927 
Year of Publication: 
2025
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1682
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
This paper examines the relationship between wages and market power at the firm level. We derive firm-specific measures of labor market power and present a natural decomposition of wage changes into shifts in labor market power and labor productivity. Our findings indicate that 50-60 percent of the variation in nominal wages is attributable to price changes, while the remaining portion, reflecting changes in real wages, is explained mainly by changes in market power and, to a lesser extent, by changes in labor productivity. Moreover, we show that firms with greater market power tend to pay higher wages, suggesting rent-sharing between employers and employees, at the cost of higher prices for consumers.
Subjects: 
Wages
Price markups
Labor market power
JEL: 
L1
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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