The Aggregate Effects of Labor Market Concentration

What are the efficiency and welfare effects of employer and union labor market power? Using data from French manufacturing firms, we leverage mass layoff shocks to competitors to identify a negative effect of employment concentration on wages. In line with the reduced form evidence and the French institutional setting, we develop and estimate a multi-sector bargaining model that incorporates employer market power. We find that eliminating employer and union labor market power increases output by 1.6 percent and the labor share by 21 percentage points. Workers' geographic mobility is key to realizing the output gains