Research

• Master's thesis:  Labor market concentration from the firm's perspective

Abstract: This work wants to quantify the extent to which labor markets are concentrated in Italy and how concentration affects firms’ outcomes such as total salaries and wages paid to workers, profits before taxes and fees, and labor productivity measured as value-added per employee. By extracting employee data from Aida and estimating the number of employees in each 4-digit occupation for each firm in the dataset using data from the Labor Force Surveys, I can randomly sample 2000 labor markets throughout the country, each one defined as the interaction between a province, a 4-digit occupation, and a year. Then, I compute the HHI for each market in the sample. Using a 2SLS approach, I estimate that going from the 25th percentile to the 75th percentile in concentration is associated with a reduction in total wages by 8.09-19.64%, a profit rise of 5.35-28.34%, and a fall in value added per capita of 48.42-90.80%. The average results hide substantial heterogeneity among firms of different sizes and depending on markets and firms’ characteristics. Indeed, firms in the top six deciles of the size distribution seem to respond to higher concentration by reducing salaries and increasing profits and value-added per capita, while firms in the bottom four deciles experience a rise in salaries and a reduction in profits and value-added per capita when concentration increases. In addition, the effects of concentration appear to be driven by specific occupations like managers, plant and machinery operators, and clerical workers, and to be larger in magnitude when the firms’ employees are mostly women. To explain the results, I propose an interpretation that combines the traditional theory of monopsony with workers’ sorting which might help explain why profits respond more than wages to concentration on average and why we observe the pattern of heterogeneity mentioned above.