Labor market concentration and labor share dynamics for US regional industries

This paper establishes labor market concentration as an important determinant of the total output share received by workers. The existing monopsony literature has established a link between employer power in the labor market and worker compensation. From this starting point, I identify and test a causal link between monopsony and labor shares at the industry level, utilizing regional data from the U.S. Economic Census and Bureau of Economic Analysis from 2002-2016. I find an increase in labor market monopsony is associated with labor share decline in several industries. Those industries with strongest negative concentration effects include those that have been identified in the literature as most responsible for driving aggregate labor share decline. The results suggest non-competitive labor markets are important for explaining inequality.