April 2013

IZA DP No. 7342: Firm Market Power and the Earnings Distribution

published in: Labour Economics, 2015, 35, 123-134

Using linked employer-employee data, I compute firm-level measures of the labor supply elasticity facing each private non-farm firm in the US. I provide the first direct evidence of the positive relationship between a firm's labor supply elasticity and the earnings of its workers. I also contrast the dynamic model method employed by this paper with the more traditional use of concentration ratios to measure a firm's labor market power. Finally, I construct a counterfactual earnings distribution which allows the effects of firm market power to vary across the earnings distribution.


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