Collusion and Imperfect Competition in Labor Markets: A Unified Approach

In recent years, the European Commission and national competition authorities have shown significant interest in collusion and anticompetitive practices in labor markets. While extensive research has enhanced our understanding of imperfectly competitive labor markets, a critical gap remains in our comprehension of modern anticompetitive practices and explicit collusion by employers. Additionally, recent evidence suggests that unions might alleviate the negative wage effects of employment concentration on wages, but we know little about how unions might serve as a remedy against anticompetitive employment practices.To address these gaps, I propose the following research agenda: First, I will develop a benchmark theoretical model to study various anticompetitive practices in labor markets, including wage-fixing, no-poaching agreements, and noncompete clauses. A main purpose of this model is to provide a transparent approach to quantify the impact of these practices on wages, employment, and overall economic welfare using readily available data. Second, I will extend this model to incorporate the role of unions and asymmetric information, exploring how unions might counteract anticompetitive practices and interact with pay transparency initiatives. Third, I will confront the theoretical framework with empirical evidence on firm pay dynamics, thereby working to reconcile two large literatures on firm dynamics and pay premiums across firms. I will document empirical patterns using recently developed reduced-form methods and employer-employee data and examine the implications for the structure of labor market frictions. This analysis will assess the consistency of the models with observed patterns in wages, productivity, and worker mobility. Ultimately, this research aims to inform antitrust policies by developing and empirically assessing a comprehensive model of anticompetitive practices in labor markets, incorporating unions, information frictions, and firm dynamics.