Concentration, Unionism, and Labor Earnings: A Sample Selection Approach

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Abstract
HE effect of market concentration on wages has been a matter of disagreement among ecollomists since the rise of trusts at the end of the last century. writers including ~ ~G ~ ~ &gal, and Levinson have argued that more con- centrated industries will pay figher wages then less concentrated industries. Others, notably Rees, have suggested that figherconcentration could reduce wages. The issue retains interest both be- cause concentration may play an important role in the determination of wages and because a positive relation between concentration and the industry wage bill would indicate the social costs of con- centration have been systematically underesti- mated. ~hi~~~-fi~~ years of empirical research have done little to resolve these questions. ~~~i~~~~~ of con- centration's effect on wages have varied between positive and significant to statistically insignificant depending on the universe of the study, the level of aggregation of the data, the specification of the l ~ ~ ~ ~ ~ , ~ ~ ~ ~ wage. There is an indirect effect if the relation is mediated through another factor, notably union- ization. Commonly cited arguments for a direct relation are that the inelasticity of the demand curves of firms in concentrated industries reduces their incentive to resist high wages, that unions

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