What the study found
The study finds that firm market power and worker bargaining power both shape wages and welfare. The author also reports that patterns in French micro-data linking wages and firm market power are not explained by existing models, but are explained by a model with vertically differentiated goods and profit sharing between firms and workers.
Why the authors say this matters
The authors suggest the findings matter because they help explain how wages respond to firm market power and worker bargaining power. The study also says the model reveals new challenges in estimating monopsony, meaning a market situation where employers have power over wages, and bargaining power.
What the researchers tested
The researcher used French micro-data to study how firm market power and worker bargaining power relate to wages and welfare. They developed a model in which firms produce vertically differentiated goods, meaning products that differ in quality, and share profits with workers.
What worked and what didn't
The abstract says existing models could not explain the observed wage-market power patterns in the French data. The vertically differentiated goods and profit-sharing model did explain those patterns, and it also showed that the passthrough of firm-specific shocks to wages depends on the type of shock.
What to keep in mind
The summary provided here is limited to the abstract, so only the results stated there can be reported. The abstract does not give detailed robustness checks, sample details beyond French micro-data, or specific quantitative estimates.
Key points
- French micro-data showed wage patterns linked to firm market power that existing models could not explain.
- A model with vertically differentiated goods and profit sharing fit the observed patterns.
- The study says estimating monopsony and bargaining power is challenging and proposes an alternative approach.
- Passthrough of firm-specific shocks to wages depends on the type of shock, according to the model.
- The model formalizes how stronger worker bargaining power affects wages and welfare.
Disclosure
- Research title:
- Firm market power and worker bargaining power shape wages
- Authors:
- Horng Chern Wong
- Institutions:
- Stockholm University
- Publication date:
- 2026-06-30
- DOI:
- 10.1257/aer.20230344
- OpenAlex record:
- View
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