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Labor Market Concentrations, Firm Size Inequalities, and Their Impacts on Wages

Hedenstierna Jonson, August LU (2025) NEKN01 20251
Department of Economics
Abstract
This paper expands on the literature on labor market power and its impact on wages. With previous studies having focused on labor market concentration, this paper reviews theoretical background for firm heterogeneity and argues firm size inequality (FSI) presents an alternative theoretical framework through which labor market power can be evaluated. The paper then quantitatively estimates the impact of different market structure indicators on wages in different Swedish labor markets, primarily using the Herfindahl-Hirschman Index (HHI) and Gini index. It uses a panel data approach, with a set constructed from firm financial statements between 2015-2019. Immediate findings act in sharp contrast to theory, with increasing HHI having a... (More)
This paper expands on the literature on labor market power and its impact on wages. With previous studies having focused on labor market concentration, this paper reviews theoretical background for firm heterogeneity and argues firm size inequality (FSI) presents an alternative theoretical framework through which labor market power can be evaluated. The paper then quantitatively estimates the impact of different market structure indicators on wages in different Swedish labor markets, primarily using the Herfindahl-Hirschman Index (HHI) and Gini index. It uses a panel data approach, with a set constructed from firm financial statements between 2015-2019. Immediate findings act in sharp contrast to theory, with increasing HHI having a positive impact on wages and Gini having a negative one. These results are deemed to have significant endogeneity issues, as instrumenting these variables with national level growth rates removes all statistically significant effects of market structure indicators on wages. The paper argues this is due to the nationally centralized nature of Swedish wage negotiation rendering local market structures largely irrelevant. The paper also illustrates that HHI and Gini measure two dynamics at least moderately independent of each other, and thus present alternative analytical frameworks. The paper argues for broadened diversity of metrics in future studies. (Less)
Please use this url to cite or link to this publication:
author
Hedenstierna Jonson, August LU
supervisor
organization
course
NEKN01 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
Labor market concentration, firm size inequality, labor market power, Swedish labor markets, Gini index
language
English
id
9195088
date added to LUP
2025-09-12 10:07:05
date last changed
2025-09-12 10:07:05
@misc{9195088,
  abstract     = {{This paper expands on the literature on labor market power and its impact on wages. With previous studies having focused on labor market concentration, this paper reviews theoretical background for firm heterogeneity and argues firm size inequality (FSI) presents an alternative theoretical framework through which labor market power can be evaluated. The paper then quantitatively estimates the impact of different market structure indicators on wages in different Swedish labor markets, primarily using the Herfindahl-Hirschman Index (HHI) and Gini index. It uses a panel data approach, with a set constructed from firm financial statements between 2015-2019. Immediate findings act in sharp contrast to theory, with increasing HHI having a positive impact on wages and Gini having a negative one. These results are deemed to have significant endogeneity issues, as instrumenting these variables with national level growth rates removes all statistically significant effects of market structure indicators on wages. The paper argues this is due to the nationally centralized nature of Swedish wage negotiation rendering local market structures largely irrelevant. The paper also illustrates that HHI and Gini measure two dynamics at least moderately independent of each other, and thus present alternative analytical frameworks. The paper argues for broadened diversity of metrics in future studies.}},
  author       = {{Hedenstierna Jonson, August}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Labor Market Concentrations, Firm Size Inequalities, and Their Impacts on Wages}},
  year         = {{2025}},
}