Labour market power and between-firm wage (in)equality

Matthias Mertens

I study how labour market power affects firm wage differences using German manufacturing sector firm-level data (1995-2016). In past decades, labour market power increasingly moderated rising between-firm wage inequality. This is becausehigh-paying firms possess high and increasing labour market power and pay wages below competitive levels, whereas low-wage firms pay competitive wages. Over time, large, high-wage, high-productivity firms generate increasingly large labour market rents while selling on competitive product markets. This provides novel insights on why such "superstar firms" are profitable and successful. Using micro-aggregated data covering most economic sectors, I validate my results for ten other European countries.

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Year of publication:	[2021] ; This draft: May 18, 2021
Authors:	Mertens, Matthias
Publisher:	Halle (Saale), Germany : Halle Institute for Economic Research (IWH), Member of the Leibniz Association
Subject:	inequality \| labour market power \| monopsony \| rent-sharing \| superstar firms \| Arbeitsmarkt \| Labour market \| Marktmacht \| Market power \| Monopson \| Monopsony \| Theorie \| Theory \| Einkommensverteilung \| Income distribution \| Lohnstruktur \| Wage structure \| Lohn \| Wages