Impact of Market Concentration on Salaries: Evidence for the Manufacturing Industry (2002-2017)
Market Power; Concentration; Labor Market; Wages.
Existing theories about the labor market argue that the low bargaining capacity of workers caused by low qualifications and little spatial mobility can increase the market power of companies that use this factor to reduce wages. Empirical evidence of the association between market concentration is focused on developed countries, leaving the analysis limited to countries with recent industrialization. In this way, the present work estimates the impact of labor market concentration, measured through the Herfindahl-Hirschman index (IHH), on the average wages of workers in the Manufacturing Industry, for the period 2002-2017, using microdata from RAIS/ME. About 78.49% of highly concentrated establishments represent 87.83% of national employment. The results showed that a 1% increase in labor market concentration is associated with a 0.089% reduction in average real wages, with no significant wage differentials between municipalities with absolute monopsony power and those with a degree of concentration lower than one.