Research
Working Papers
Product Market Concentration, Wage Inequality and Worker Sorting (with Matias Cortes and Jeanne Tschopp)
Product markets have become increasingly dominated by a smaller number of firms with high market shares. At the same time, wage dispersion between firms has been increasing. In this paper, we show that product market concentration is associated with higher wage dispersion between firms within industries. Using rich administrative data from France covering the near-universe of workers and firms over the period 2009-2019, we find a positive and statistically significant correlation between sectoral concentration and different measures of between-firm wage inequality. The relationship is driven by (i) increased sorting of workers in high-paying occupations towards more productive firms within industries, and (ii) higher wage differentials between more and less productive firms in more concentrated industries, even conditional on their workers’ occupations. In a model that features wage heterogeneity between firms, a shock to consumer price sensitivity – which has been posited by Autor et al. (2020) as a driver of the rise in product market concentration – generates predictions that are consistent with the empirical patterns that we document.