Employer Concentration and Wages for Specialized Workers

Abstract

This paper studies how wages respond to a sudden change in employer concentration by using the deregulation of the Swedish pharmacy industry. The reform involved a substantial and policy-driven increase in the number of employers that varied by local labor market. Exploiting this variation, elasticities of wages with respect to labor market concentration are estimated between −0.025 and −0.061. The positive wage effects from reduced employer con centration are most prevalent for more mobile workers as well as younger and foreign-born workers. Overall, the paper finds that employer concentration matters for wages in a context where skills are industry specific. (JEL J24, J31, J42, L13, L81, L88)