To measure labor market power in the US economy, we develop a tractable quantitative, general equilibrium, oligopsony model of the labor market. We estimate key model parameters by matching the firm-level relationship between labor market share and employment size and wage responses to state corporate tax changes. The model quantitatively replicates quasi-experimental evidence on (i) imperfect productivity-wage pass-through, (ii) strategic behavior of dominant employers, and (iii) the local labor market impact of mergers. We then measure welfare losses relative to the efficient allocation. Accounting for transition dynamics, we quantify welfare losses from labor market power relative to the efficient allocation as roughly 6 percent of lifetime consumption. An analytical decomposition attributes equal parts to dead-weight losses and misallocation. Lastly, we find that declining local concentration added 4 ppt to labor’s share of income between 1977 and 2013.

More on this topic

BFI Working Paper·Jun 10, 2026

The Enjoyment Paradox: College-Educated Mothers Invest More in Their Children’s Learning and Enjoy It Less

Ariel Kalil, Haoxuan Liu, and Ritika Sethi
Topics: Early Childhood Education, Employment & Wages, Higher Education & Workforce Training
BFI Working Paper·May 28, 2026

Explaining the Historical Rise and Recent Decline in Social Security Disability Insurance Enrollment

Manasi Deshpande, Maxwell Kellogg, Magne Mogstad, and Kuan-Ju Tseng
Topics: Employment & Wages
BFI Working Paper·Apr 29, 2026

Intermediate Input Prices and the Labor Share

Juanma Castro-Vincenzi and Benny Kleinman
Topics: Employment & Wages