Employment Concentration and Labor Market Power

This paper studies the impact of employment concentration on earnings in Chile from 2005 to 2019. Our findings indicate that average earnings at the firm level are higher in labor markets with greater employer density. This increase is largely attributed to a reduction in firm-level wage markdowns. The effects on earnings are more significant in larger firms, due to the varying impacts on the marginal product of labor and markdowns in both large and small firms. Additionally, we show that employer competition influences employment dynamics, resulting in higher labor mobility in more competitive local labor markets (LLMs).